Toll Brothers (NYSE: TOL) and PICO Holdings (NASDAQ:PICO) are both construction companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, dividends, risk, earnings, institutional ownership, analyst recommendations and valuation.

Dividends

Toll Brothers pays an annual dividend of $0.32 per share and has a dividend yield of 0.8%. PICO Holdings does not pay a dividend. Toll Brothers pays out 13.2% of its earnings in the form of a dividend.

Institutional & Insider Ownership

80.3% of Toll Brothers shares are held by institutional investors. Comparatively, 61.6% of PICO Holdings shares are held by institutional investors. 8.8% of Toll Brothers shares are held by company insiders. Comparatively, 4.7% of PICO Holdings shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings and recommmendations for Toll Brothers and PICO Holdings, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Toll Brothers 1 6 8 0 2.47
PICO Holdings 0 0 0 0 N/A

Toll Brothers presently has a consensus price target of $39.27, suggesting a potential upside of 2.94%. Given Toll Brothers’ higher possible upside, equities analysts plainly believe Toll Brothers is more favorable than PICO Holdings.

Volatility and Risk

Toll Brothers has a beta of 1.52, indicating that its stock price is 52% more volatile than the S&P 500. Comparatively, PICO Holdings has a beta of 1.23, indicating that its stock price is 23% more volatile than the S&P 500.

Earnings and Valuation

This table compares Toll Brothers and PICO Holdings’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Toll Brothers $5.41 billion 1.15 $507.09 million $2.43 15.70
PICO Holdings $391.17 million 0.96 $10.10 million ($0.24) -67.50

Toll Brothers has higher revenue and earnings than PICO Holdings. PICO Holdings 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 Toll Brothers and PICO Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Toll Brothers 7.67% 9.71% 4.33%
PICO Holdings -2.23% -0.68% -0.44%

Summary

Toll Brothers beats PICO Holdings on 13 of the 14 factors compared between the two stocks.

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.

About PICO Holdings

PICO Holdings, Inc. (PICO) is a holding company. The Company’s segments include Water Resource and Water Storage Operations; Real Estate Operations, and Corporate. Its subsidiary, Vidler Water Company, Inc. (Vidler), owns water resources and water storage operations in the southwestern United States, with assets and operations in Nevada, Arizona, Colorado and New Mexico. The Real Estate Operations are conducted through UCP, Inc. (UCP), which is a homebuilder and land developer in markets located in California, Washington State, North Carolina, South Carolina and Tennessee. The Corporate segment includes its investments in small businesses, typically venture capital-type situations. As of December 31, 2016, the Company owned a membership interest in, and was the managing partner of, Fish Springs Ranch, LLC (FSR), which owned the Fish Springs Ranch and other properties totaling approximately 7,313 acres in Honey Lake Valley in Washoe County, approximately 40 miles north of Reno, Nevada.

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