Homebuilding company Toll Brothers (NYSE: TOL) announced better-than-expected revenue in Q4 CY2025, with sales up 15.4% year on year to $2.15 billion. Its GAAP profit of $2.19 per share was 3.4% above analysts’ consensus estimates.

Is now the time to buy Toll Brothers? Find out by accessing our full research report, it’s free.

Douglas C. Yearley, Jr., chairman and chief executive officer, stated: “We are pleased with our first quarter results, as we met or exceeded guidance across nearly all metrics. We delivered 1,899 homes at an average price of $977,000, generating home sales revenues of $1.85 billion. Our adjusted gross margin was 26.5% in the quarter, 25 basis points better than guidance, and our SG&A expense, as a percentage of homebuilding revenues, was 13.9%, 30 basis points better than guidance. As a result, we earned $2.19 per diluted share in the quarter, a 25% increase compared to the first quarter of fiscal 2025. In addition, we signed 2,303 net contracts for $2.4 billion in the quarter, flat in units but up 3% in dollars year-over-year as our average sales price increased to $1,033,000.

Company Overview

Started by two brothers who started by building and selling just one home in Pennsylvania, today Toll Brothers (NYSE: TOL) is a luxury homebuilder across the United States.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Toll Brothers grew its sales at a solid 9% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Toll Brothers’s recent performance shows its demand has slowed as its annualized revenue growth of 5.2% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Toll Brothers’s backlog reached $6.02 billion in the latest quarter and averaged 9.4% year-on-year declines over the last two years. Because this number is lower than its revenue growth, we can see the company hasn’t secured enough new orders to maintain its growth rate in the future.

This quarter, Toll Brothers reported year-on-year revenue growth of 15.4%, and its $2.15 billion of revenue exceeded Wall Street’s estimates by 15.7%.

Looking ahead, sell-side analysts expect revenue to decline by 6.4% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges.

The 1999 book Gorilla Game predicted Microsoft and Apple would dominate tech before it happened. Its thesis? Identify the platform winners early. Today, enterprise software companies embedding generative AI are becoming the new gorillas. a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.

Operating Margin

Toll Brothers has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 16.3%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Analyzing the trend in its profitability, Toll Brothers’s operating margin rose by 3.7 percentage points over the last five years, as its sales growth gave it operating leverage. Its expansion was impressive, especially when considering most Home Builders peers saw their margins plummet.

In Q4, Toll Brothers generated an operating margin profit margin of 10.2%, down 2.6 percentage points year on year. Since Toll Brothers’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Toll Brothers’s EPS grew at an astounding 29.8% compounded annual growth rate over the last five years, higher than its 9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Toll Brothers’s earnings can give us a better understanding of its performance. As we mentioned earlier, Toll Brothers’s operating margin declined this quarter but expanded by 3.7 percentage points over the last five years. Its share count also shrank by 24.3%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Toll Brothers, its two-year annual EPS growth of 4% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, Toll Brothers reported EPS of $2.19, up from $1.75 in the same quarter last year. This print beat analysts’ estimates by 3.4%. Over the next 12 months, Wall Street expects Toll Brothers’s full-year EPS of $14 to shrink by 9.7%.

Key Takeaways from Toll Brothers’s Q4 Results

We were impressed by how significantly Toll Brothers blew past analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $162.69 immediately following the results.

So do we think Toll Brothers is an attractive buy at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).