Toll Brothers, Inc. (TOL): BCG Matrix [Dec-2025 Updated]

You're looking for a clear-eyed view of where Toll Brothers, Inc. (TOL) is placing its capital and generating its returns in 2025, and the BCG Matrix is defintely the right tool for that. We've mapped their business units-the Stars driving growth with a $1.0 million average sales price, the Cash Cows delivering margins near 27.25%, the Dogs dragging on performance like the 10% shrinking backlog, and the volatile Question Marks-so you can see exactly where the focus should be. Keep reading to see the full, unvarnished breakdown of their portfolio positioning.

Background of Toll Brothers, Inc. (TOL)

You're looking at Toll Brothers, Inc. (TOL), which stands as the nation's leading builder of luxury homes, a position it continues to solidify in the evolving housing market as of late 2025. This focus on the premium segment gives Toll Brothers a distinct insulation against some of the broader affordability pressures affecting other parts of the industry. The company estimates its addressable market includes about 16 million households earning over $200,000, and Toll Brothers currently captures roughly 2% of its total addressable market of 575,000 annual housing transactions.

Let's look at the most recent hard numbers we have, which come from the third quarter of fiscal year 2025, ending July 31, 2025. For that quarter, Toll Brothers reported home sales revenues of $2.88 billion, marking a 6% increase compared to the third quarter of fiscal year 2024. During that period, the company delivered 2,959 homes, achieving an adjusted gross margin of 27.5%.

The average price point remains high, reflecting that luxury focus; for instance, the average price of new contracts signed in Q3 2025 was $1.0 million, which was up 4.5% year-over-year. Still, management noted that contract units were flat despite that price increase, pointing to the cautious environment where they focus on balancing price and pace to maximize profitability.

Financially, Toll Brothers, Inc. ended the third quarter of fiscal year 2025 with net income of $369.6 million, translating to earnings per diluted share of $3.73. The company was operating 420 selling communities at that quarter's end, and they held approximately 76,800 lots owned and optioned.

Looking ahead, the guidance for the full fiscal year 2025 projected total home deliveries of 11,200 units, with an expected average delivered price per home landing between $950,000 and $960,000. The company's strategy involves careful management of its operations, as evidenced by its recent corporate actions, like issuing $500.0 million of senior notes in June 2025 and redeeming older notes in July 2025.

Toll Brothers, Inc. (TOL) - BCG Matrix: Stars

You're looking at the segments of Toll Brothers, Inc. (TOL) that are leading the charge in high-growth areas, which is what we call Stars in the BCG Matrix. These units have a strong position in markets that are expanding, but they still require significant investment to maintain that lead.

The core strength here is the focus on the luxury buyer who remains relatively insulated from broader affordability pressures. This is evident in the pricing power Toll Brothers, Inc. (TOL) maintains.

• The average sales price of new contracts reached $1.0 million in the third quarter of fiscal year 2025.
• This contract average price represented a 4.5% increase year-over-year for the third quarter of FY 2025.
• The average price of homes delivered in Q3 2025 was $974,000.
• Net signed contract value was $2.41 billion for the third quarter, flat year-over-year, but driven by that higher ASP.

This segment is characterized by aggressive, yet strategic, physical expansion to capture that high-end demand.

Luxury communities in high-growth Sun Belt markets are a major driver. Toll Brothers, Inc. (TOL) is actively launching new luxury phases in states like Florida, Georgia, Nevada, and North Carolina, targeting supply-constrained, higher-income areas.

Also, the Active-Adult and Second Home line, the Regency Collection, is seeing surging demand. This targets wealthy, rate-insensitive Boomers who are buying retirement homes earlier, often while still employed remotely. You see this focus with new developments like Regency at Sienna near Houston and expansions to the 55+ Excursion Collection in markets like Raleigh.

The commitment to growth is clear in the land control and community pipeline. The company expects to grow its community count by 8% to 10% year-over-year, projecting 440 to 450 communities open by the end of fiscal year 2025. This expansion requires cash to acquire land-they spent approximately $432.7 million on land to purchase roughly 2,755 lots in the third quarter alone.

The build-to-order model, which allows for personalization, supports these high-end prices. While incentives on new contracts ticked up to approximately 8% in Q3 2025 from 7% in Q2 2025, the resulting contract ASP of $1.0 million shows the value proposition is holding for the affluent buyer.

• New contract incentives were approximately 8% in Q3 2025.
• New contract incentives were approximately 7% in Q2 2025.
• The company expects to generate another $1 billion in cash flow from operations for the full year 2025.

Toll Brothers, Inc. (TOL) - BCG Matrix: Cash Cows

The core luxury homebuilding operation of Toll Brothers, Inc. represents the quintessential Cash Cow. This segment operates with a high market share within its premium, less price-sensitive niche, positioning Toll Brothers, Inc. as the nation's leading builder of luxury homes. As of the third quarter of fiscal year 2025, the scale of this operation is evidenced by its presence across numerous markets, ending Q3 with 420 selling communities.

Profitability for this established business line is projected to remain stable and high for the full fiscal year 2025. Toll Brothers, Inc. expects an adjusted gross margin of approximately 27.25% for the full fiscal year 2025. This level of margin generation, characteristic of a market leader in a mature segment, contributes significantly to the company's overall financial health.

The strong balance sheet and consistent cash flow generation allow Toll Brothers, Inc. to prioritize returning capital to shareholders, a key action for a Cash Cow. Management increased the projected share repurchase program for fiscal year 2025 to $600 million. This commitment to capital return is supported by the company's financial footing, which included $852.3 million in cash and cash equivalents at the end of the third quarter of fiscal year 2025, and a net debt-to-capital ratio of 19.3%.

The overall business volume underscores the significant cash generation capability of this segment. Toll Brothers, Inc. is projected to deliver home sales revenue of $10.9 billion at the midpoint for fiscal year 2025. This substantial revenue base, coupled with high margins, fuels the enterprise.

Here are key financial metrics supporting the Cash Cow status for Toll Brothers, Inc. as of the latest reported data for FY 2025:

The operational focus for a Cash Cow like Toll Brothers, Inc. is maintaining efficiency rather than aggressive expansion in the core market, which is reflected in their community count management. The company is focused on milking the gains passively, which means investments are targeted:

• Maintain current productivity levels in established luxury markets.
• Invest in infrastructure to improve efficiency and further boost cash flow.
• Fund other portfolio segments, like Question Marks, from this segment's surplus.

Toll Brothers, Inc. (TOL) - BCG Matrix: Dogs

The Dogs quadrant represents business units or assets characterized by low market share in low-growth markets. For Toll Brothers, Inc. (TOL), this category is suggested by areas of the business showing contraction or requiring increased effort to move inventory, which ties up capital without generating commensurate returns.

The overall backlog figures provide a clear, quantifiable signal of slowing future revenue conversion, a hallmark of assets that may be classified as Dogs or are under pressure from market dynamics. The overall backlog value stood at $6.38 billion at the end of Q3 2025, representing a 10% decrease year-over-year. Furthermore, the number of homes in this backlog fell even more sharply, down 19% year-over-year to 5,492 units. This suggests that while the average price per home in the backlog remains high, the volume of future recognized revenue is shrinking.

This pressure is not uniform across the entire portfolio. Toll Brothers, Inc. (TOL) management noted in Q1 2025 that affordability constraints and growing inventories were specifically pressuring sales, especially at the lower end. This points directly to the potential existence of older, fully-developed communities in mature, low-growth markets that now require higher incentives to sell, fitting the classic definition of a Dog. These assets are less aligned with the core luxury strategy and consume management attention and capital.

The strategic pivot in land management further supports the identification of non-core or underperforming assets that fit this profile. Toll Brothers, Inc. (TOL) is actively shifting its land position, aiming to reduce its owned land share from 44% (as of Q1 2025) down toward 40%, while increasing the percentage of optioned land to improve capital efficiency and reduce risk. This implies a deliberate move to shed or avoid holding legacy land parcels that are not core to the current luxury strategy and are held only for eventual, non-strategic disposition.

The following table summarizes the key financial indicators from Q3 2025 that reflect stagnation or decline, which are characteristic of the Dog segment:

Assets that would be categorized within the Dogs quadrant based on market context and strategic alignment include:

• Older communities needing higher incentives to move volume.
• Inventory in less-affluent, rate-sensitive luxury tiers.
• Legacy land parcels outside the core luxury focus.
• Any community with a sales pace significantly below the portfolio average.

The company is managing this by strategically balancing price and pace, as evidenced by the average sales price of new contracts rising 4.5% year-over-year to approximately $1.0 million, even as unit orders declined. This price focus over pace is a common response when dealing with lower-performing assets that require margin protection.

Toll Brothers, Inc. (TOL) - BCG Matrix: Question Marks

You're analyzing the parts of Toll Brothers, Inc. (TOL) that are burning cash now but hold the promise of becoming future Stars. These are the areas where the company has placed capital in growing markets but hasn't yet secured a dominant position, or where the strategy itself introduces near-term risk. Honestly, it's where the biggest potential upside-and downside-resides.

The core of this uncertainty centers on the shift in production mix and the status of the non-core rental businesses. Toll Brothers, Inc. is actively managing these segments, which consume resources while the market decides their ultimate value to the enterprise.

Speculative Home Strategy and Inventory Risk

The increasing reliance on speculative (spec) homes is a clear Question Mark. While this strategy caters to buyers needing quicker move-in options, it inherently increases inventory risk if demand softens unexpectedly. The company is betting that its affluent buyer base will absorb these homes, but it requires significant upfront capital commitment.

Here's the quick math on that pivot:

If the market remains strong, this high-volume, quicker-turnaround model fuels revenue; if it tightens, this inventory becomes a drag. What this estimate hides is the exact carrying cost of that inventory.

Toll Brothers Apartment Living and Campus Living

The luxury for-rent segments-Toll Brothers Apartment Living and Toll Brothers Campus Living-are explicitly non-core to the primary for-sale business. These developments require substantial capital investment through joint ventures, fitting the cash-consuming profile of a Question Mark. The strategic move here is a clear decision point: invest to grow or sell to realize value.

The company is actively moving toward a divestiture, which suggests management views the capital as better deployed elsewhere, or that the segment has not achieved the desired market share or return profile relative to the core business.

• Units completed nationally (Apartment Living): Over 10,000.
• Units currently in production (Apartment Living): Over 18,000.
• AUM in properties subject to Kennedy Wilson acquisition: $2.2 billion.
• Number of properties in the sale transaction: 18 apartment and student housing properties.

The expected closing of the sale in October 2025 signals a move to exit this Question Mark quadrant, converting potential future growth into immediate balance sheet strength.

Toll Brothers City Living and New Market Expansion

Toll Brothers City Living, focusing on mid- and high-rise urban for-sale communities, operates in markets known for high-volatility dynamics. While the company is expanding its footprint, these urban infill projects often have longer development cycles and different competitive landscapes than their suburban counterparts, making market share gains slower and more uncertain.

The broader investment in new markets and product lines also falls here. The company operates in over 60 markets across 24 states as of Q1 2025. This geographic diversity is a hedge, but each new market requires investment before it generates the returns of an established 'Cash Cow.'

• Geographic Footprint: Operates in 24 states as of Q1 2025.
• Community Count Growth: On track to operate from 410 communities by FYE 2024, up from 370 at the start of the year.
• Land Control: Owned/controlled 72,700 lots at the time of Q3 2024 results.
• FY 2024 Total Revenue: $10.85 billion.

These investments are necessary for growth, but until market share solidifies in these new or volatile areas, they remain cash consumers with unproven returns.