On Thursday, the S&P 500 was up 0.3% and Toronto was up 0.2%
Toll Brothers was down 2.4% to $33.55. That makes the price to book value 1.13. The trailing price to earnings ratio is 8.4 and the stock is trading at just 6.5 times the earnings that analysts expect it to achieve next year. There are certainly times when book value is meaningless. But here the book value is invested in land and buildings and there is no purchased goodwill on the balance sheet. Overall the stock simply looks stupidly cheap to me. That does not mean it can’t get cheaper. But ultimately the stock price will reflect the earnings performance. Market sentiment can push stocks down or up temporarily. And temporary can certainly feel like a long time. But at some point shares will reflect fundamentals and earnings.
Constellation software was up 3.0%.
AutoCanada was up 4.4% and this evening announced that its lenders had relaxed one of its debt covenants to allow its funded debt (which apparently means long-term debt and probably excludes its short term inventory financing debt) to temporarily rise as high as 4.5 times EBITDA rather than the current 4.0 times limit. The company indicates that it does not actually expect to exceed the 4.0 limit but the allowance to go to 4.5 gives it more flexibility and demonstrates that its lenders have confidence in the company. Overall, this announcement does seem to be moderately good news.