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Despite a slowdown in the housing market, the homebuilder bulls have been able to take solace in the notion that the very low earnings multiples most homebuilding stocks boast would cushion the stocks from further downside. Unfortunately, the E can change as much or more as the P. As Yahoo reports:

In its fiscal fourth quarter that ended on October 31, profit fell to $173.8 million, or $1.07 per share, from $310.3 million, or $1.84 per share, a year earlier. Analysts had expected $1.06 per share. Toll said it expected earnings of $1.58 to $2.08 a share for fiscal 2007.

The old rule of thumb for cyclicals is to buy when the P/E is high and sell when it is low. The question now is whether it is high enough. But for the record, this discussion is the very reason we remain cautious on semiconductors.

TOL 1-yr chart:

TOL 1-yr chart

Source: Toll Brothers' Single Digit P/E Out the Door