'Buy a home', but don't buy Toll stock 'yet': analyst

Toll Bros. has been selling more homes, but at lower prices, notes Merrill H. Ross, homebuilder analyst at BGB Securities in Washington, DC. ADD: Toll sold a net 837 units, worth $448 million, in the quarter, vs 812 units, worth $470 million, a year ago. Quarterly report here.

By pricing homes at realistically lower rates, Toll "is capturing market share of luxury home buyers," but they're still "few and far between," added Ross. "We believe that sales will continue to be depressed through 2010." ("We are reducing incentives and raising prices at selected communities," ceo Bruce Toll said in the report.)

Maybe Toll "can build luxury homes at a profit at some point in 2010" if orders keep rising, Ross added. But she adds there's still a lot of unsold homes to unload before Toll can boost prices enough to make a priofit.

Her conclusion: "Buy a Home, Not the Stock for Now." Toll stock at $23 a share "is unsustainable," Ross writes, because, once you discount land-impairment charges and deferred-tax credits, "Toll is building homes at break-even profits". She recommends buying the stock if it falls to $17.