Toll Brothers (TOL) is turning heads again, and if you have the stock on your watchlist, you might be wondering whether recent moves are a signal or just noise. There has not been a headline-grabbing development this week, but the pace of its gains has raised eyebrows. As shares continue to quietly push higher, the question is whether investors are simply riding homebuilding’s broader strength or if the fundamentals truly justify these levels. Over the past year, Toll Brothers shares have delivered an increase of 7%. There is a more dramatic story in recent months, as the stock has climbed more than 17% in the past month and racked up a 32% gain in just the past three months. Annual growth in revenue and net income both sit around 4%. Momentum appears to be building, even as markets weigh higher rates and housing demand trends. After a surge like this, the big question becomes: is there still room for Toll Brothers to run, or have investors already priced in the next stage of growth?

Most Popular Narrative: 1.3% Undervalued

According to the most widely followed narrative, shares of Toll Brothers are trading just below their estimated fair value, with analysts broadly agreeing the stock is only slightly undervalued after accounting for long-term earnings and revenue projections.

Upcoming expansions in community count (projected 8 to 10 percent year-over-year growth and a similar outlook for next year) position Toll Brothers to capture more buyers in supply-constrained housing markets. This supports revenue and earnings growth as new communities open in high-demand, affluent regions.

Want to uncover the bold thesis behind Toll Brothers’ “almost-right” price tag? The secret lies in ambitious growth bets, steady profit improvement, and a few controversial valuation levers. Are the analysts’ core assumptions riskier than they seem, or is this just the next chapter in luxury housing’s unstoppable story? Keep reading to see which projections might tip the balance on this undervaluation call.

Result: Fair Value of $149.94 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent reliance on speculative home builds and rising margin pressure could quickly flip optimism. This is especially true if luxury home demand begins to soften.

Find out about the key risks to this Toll Brothers narrative.

Another View: Discounted Cash Flow Puts Value Even Lower

There is another way to look at Toll Brothers’ valuation. Our DCF model, which estimates fair value by projecting future cash flows, suggests the stock may be even more undervalued than the analyst consensus. This deeper discount could indicate a hidden opportunity, or it may mean that key risks are not fully appreciated.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day ( check out Toll Brothers for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Toll Brothers Narrative

If you see things differently or want to dive into the numbers yourself, it only takes a few minutes to assemble your own narrative. Do it your way

A great starting point for your Toll Brothers research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.