Taylor Morrison Home (NYSE: TMHC) and Toll Brothers (NYSE:TOL) are both mid-cap construction companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, valuation, profitability, analyst recommendations, institutional ownership, risk and dividends.

Institutional & Insider Ownership

59.1% of Taylor Morrison Home shares are owned by institutional investors. Comparatively, 82.5% of Toll Brothers shares are owned by institutional investors. 2.4% of Taylor Morrison Home shares are owned by company insiders. Comparatively, 8.8% of Toll Brothers shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Taylor Morrison Home and Toll Brothers’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Taylor Morrison Home $3.55 billion 0.82 $52.61 million $1.84 13.16
Toll Brothers $5.82 billion 1.27 $535.49 million $3.18 15.10

Toll Brothers has higher revenue and earnings than Taylor Morrison Home. Taylor Morrison Home is trading at a lower price-to-earnings ratio than Toll Brothers, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Taylor Morrison Home and Toll Brothers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Taylor Morrison Home 2.41% 4.18% 2.21%
Toll Brothers 9.21% 12.00% 5.50%

Analyst Ratings

This is a breakdown of recent recommendations for Taylor Morrison Home and Toll Brothers, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Taylor Morrison Home 0 3 1 0 2.25
Toll Brothers 1 6 10 0 2.53

Taylor Morrison Home presently has a consensus price target of $24.00, indicating a potential downside of 0.87%. Toll Brothers has a consensus price target of $48.07, indicating a potential upside of 0.09%. Given Toll Brothers’ stronger consensus rating and higher possible upside, analysts plainly believe Toll Brothers is more favorable than Taylor Morrison Home.

Dividends

Toll Brothers pays an annual dividend of $0.32 per share and has a dividend yield of 0.7%. Taylor Morrison Home does not pay a dividend. Toll Brothers pays out 10.1% of its earnings in the form of a dividend.

Risk and Volatility

Taylor Morrison Home has a beta of 1.47, meaning that its stock price is 47% more volatile than the S&P 500. Comparatively, Toll Brothers has a beta of 1.56, meaning that its stock price is 56% more volatile than the S&P 500.

Summary

Toll Brothers beats Taylor Morrison Home on 15 of the 16 factors compared between the two stocks.

About Taylor Morrison Home

Taylor Morrison Home Corporation is a homebuilder, which designs, builds and sells single-family detached and attached homes. The Company is also a land developer, with a portfolio of lifestyle and master-planned communities. Its segments include East, which includes Atlanta, Charlotte, North Florida, Raleigh, Southwest Florida and Tampa; Central, which includes Austin, Dallas, and Houston (each of the Dallas and Houston markets include both a Taylor Morrison division and a Darling Homes division); West, which includes Bay Area, Chicago, Denver, Phoenix, Sacramento and Southern California, and Mortgage Operations, which includes Taylor Morrison Home Funding, LLC (TMHF) and Inspired Title Services, LLC (Inspired Title). It operates under the Taylor Morrison and Darling Homes brand names. The Company also provides financial services to customers through its mortgage subsidiary, TMHF, and title insurance and closing settlement services through its title company, Inspired Title.

About Toll Brothers

Toll Brothers, Inc. is engaged in designing, building, marketing, selling and arranging financing for detached and attached homes in luxury residential communities. The Company operates through two segments: Traditional Home Building and Toll Brothers City Living (City Living). Within the Traditional Home Building segment, it operates in five geographic segments in the United States: the North, consisting of Connecticut, Illinois, Massachusetts, Michigan, Minnesota, New Jersey and New York; the Mid-Atlantic, consisting of Delaware, Maryland, Pennsylvania and Virginia; the South, consisting of Florida, North Carolina and Texas; the West, consisting of Arizona, Colorado, Nevada and Washington, and California. City Living is the Company’s urban development division. Its products include Traditional Home Building Product and City Living Product. Its Traditional Home Building Product includes detached homes, move-up, executive, estate, and active-adult and age-qualified lines of home.

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