RBC Capital Markets thinks strong gains are in store for Toll Brothers as demand improves. The firm thinks sentiment surrounding the luxury homebuilder's shares have been "overly negative." Analyst Mike Dahl said "given TOL's high-end, West Coast and build-to-order exposures," recent trends show the company has experienced improvement similar to its peers. Toll Brothers announced its fiscal second-quarter earnings Tuesday after the bell. However, the analyst believes Toll Brothers is a relative outperformer due to its resilient margins profile higher than its peers' average and an inexpensive valuation.

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Persons: Mike Dahl, Dahl, TOL, Toll, — CNBC's Michael Bloom Organizations: RBC Capital Markets, Toll Brothers, 1Q Locations: West Coast