Option Trade 
Toll Brothers Inc (NYSE:TOL) Calls 
Monday, 22nd August, 2016

** OPTION TRADE: Buy the TOL DEC 16 2016 30.000 call at approximately $1.20. Place a pre-determined sell at $2.40.

Note: No protective stop losses added -- but if you wish to do so make it $0.50.

by Ian Harvey

August 22, 2016

Toll Brothers Inc (NYSE: TOL), a U.S. homebuilder, is scheduled to report its fiscal third-quarter results tomorrow, August 23. The company will post its quarterly numbers before the market open, with analysts forecasting earnings of $0.63 per share on revenue of $1.25 billion.

During the same period last year, the company earned $0.36 per share and had revenue of $1.03 billion.

Toll Brothers posted solid numbers last quarter, and if the company can post another set of strong numbers for its fiscal third-quarter the stock may finally break out of the sideways trend it has been stuck in during the first half of the year. The housing market continues to recover, and with interest rates expected to remain low well into next year the housing market should remain strong. Wall Street expects Toll Brothers to enjoy 31.5% for the full year, and the stock has a P/E of just 13.9, so the stock should trend higher barring any huge earnings miss. Interest rates remain near zero, and with a very small chance of rising any time soon, the housing market should remain strong enough to keep interest in homebuilding stocks.

It has generally been a good earnings season for homebuilders, and Wall Street has a whisper number on TOL’s earnings of $0.65, which is two pennies above the consensus.

Toll Brothers Inc. are heading into 2nd half of this year on a positive note as the stock provided some gains of 10.56% over the past 6 months. More recently the stock is 2.90% over the past 5 trading days. Looking a bit further out the stock is 2.79% for the month and 4.39% for the quarter.

Toll Brothers has a 1-year low of $23.75 and a 1-year high of $42.19. The stock has a market cap of $4.77 billion and a P/E ratio of 13.87. The stock has a 50 day moving average price of $27.76 and a 200-day moving average price of $27.83.

Analyst Input

Toll Brothers Inc. was upgraded by analysts at TheStreet from a “hold” rating to a “buy” rating in a research note issued last Monday.

Also, several other equities research analysts have recently commented on the company.

• Deutsche Bank AG reaffirmed a “buy” rating and issued a $41.00 price objective on shares of Toll Brothers in a report on Wednesday, May 25th.

• MKM Partners reaffirmed a “buy” rating on shares of Toll Brothers in a report on Sunday, May 22nd.

One research analyst has rated the stock with a sell rating, nine have given a hold rating, eleven have given a buy rating and one has given a strong buy rating to the stock. The company presently has an average rating of “Buy” and an average price target of $38.34.

Harvey’s Options Volatility Indicator

Conclusion

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the TOL DEC 16 2016 30.000 call at approximately $1.20. Place a pre-determined sell at $2.40.

Note: No protective stop losses added -- but if you wish to do so make it $0.50.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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