Head-To-Head Survey: MDC (MDC) and Toll Brothers (NYSE:TOL)

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

Profitability

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This table compares MDC and Toll Brothers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
MDC 5.50% 11.00% 5.82%
Toll Brothers 9.84% 12.58% 5.80%

Dividends

MDC pays an annual dividend of $1.20 per share and has a dividend yield of 4.2%. Toll Brothers pays an annual dividend of $0.32 per share and has a dividend yield of 0.8%. MDC pays out 46.5% of its earnings in the form of a dividend. Toll Brothers pays out 10.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. MDC has increased its dividend for 6 consecutive years. MDC is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

MDC has a beta of 1.47, indicating that its stock price is 47% more volatile than the S&P 500. Comparatively, Toll Brothers has a beta of 1.38, indicating that its stock price is 38% more volatile than the S&P 500.

Insider and Institutional Ownership

94.3% of MDC shares are held by institutional investors. Comparatively, 86.0% of Toll Brothers shares are held by institutional investors. 27.0% of MDC shares are held by insiders. Comparatively, 8.8% of Toll Brothers shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations and price targets for MDC and Toll Brothers, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
MDC 1 5 1 0 2.00
Toll Brothers 1 5 10 0 2.56

MDC presently has a consensus price target of $32.67, indicating a potential upside of 13.15%. Toll Brothers has a consensus price target of $50.29, indicating a potential upside of 18.91%. Given Toll Brothers’ stronger consensus rating and higher possible upside, analysts clearly believe Toll Brothers is more favorable than MDC.

Valuation and Earnings

This table compares MDC and Toll Brothers’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
MDC $2.58 billion 0.63 $141.83 million $2.58 11.19
Toll Brothers $5.82 billion 1.12 $535.49 million $3.17 13.34

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

Summary

Toll Brothers beats MDC on 11 of the 17 factors compared between the two stocks.

MDC Company Profile

M.D.C. Holdings, Inc., through its subsidiaries, engages in the homebuilding and financial service businesses. Its homebuilding operations include purchasing finished lots or developing lots for the construction and sale primarily of single-family detached homes to first-time and first-time move-up homebuyers under the Richmond American Homes name. The company conducts its homebuilding operations in Arizona, California, Nevada, Washington, Colorado, Utah, Virginia, Florida, Maryland, Pennsylvania, and New Jersey. Its financial services operations consist of originating mortgage loans primarily for homebuyers; providing insurance coverage primarily to its homebuilding subsidiaries and subcontractors for homes sold by its homebuilding subsidiaries, and for work performed in completed subdivisions; acting as a re-insurer on the claims; selling third-party personal property and casualty insurance products to homebuyers; and offering title agency services to homebuilding subsidiaries and customers in Colorado, Florida, Maryland, Nevada, and Virginia. M.D.C. Holdings, Inc. was founded in 1972 and is based in Denver, Colorado.

Toll Brothers Company Profile

Toll Brothers, Inc., together with its subsidiaries, designs, builds, markets, and arranges finance for detached and attached homes in luxury residential communities in the United States. The company operates through two segments, Traditional Home Building and City Living. It also builds and sells homes in urban infill markets through Toll Brothers City Living. In addition, the company develops, owns, and operates golf courses and country clubs; develops and sells land to other builders; and develops, operates, and rents apartments. Further, it owns and operates architectural, engineering, mortgage, title, landscaping, security monitoring, lumber distribution, house component assembly, and manufacturing operations. The company serves move-up, empty-nester, active-adult, and second-home buyers. Toll Brothers, Inc. was founded in 1967 and is headquartered in Horsham, Pennsylvania.

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