When most homebuilders have been suffering losses, Toll Brothers' (NYSE: TOL) 54% surge in its third-quarter net profits came as a pleasant surprise, though it was primarily because of a tax benefit.

Toll might be yet another poor homebuilder hit by the housing downturn, but delving a little deeper gives us reasons to have faith in its potential in the long run.

The not-so-good numbers
Toll's revenue slipped 13% to $394.3 million, dragged down by a 14% fall in the number of homes delivered. Its cancellation rates also rose from 6.2% to 7.4% year on year.

In spite of falling revenue, Toll's net income rose to $42.1 million owing to that tax benefit of $38.2 million as compared to $26.5 million last year. But excluding the benefit, pre-tax income still rose from $0.8 million to $3.9 million.

The positives
Not everything about the luxury homebuilder's numbers was negative.

Toll's net signed contracts, for instance, rose 2% to $406.7 million. Also, their average price remained at $570,000, almost the same as last year's, indicating that Toll did not have to resort to cutting prices.

More importantly, the future business indicator -- backlogs -- has increased 9% in units. The projected future housing revenue is thus 8% higher at $1.02 billion. This sounds much better than a 1% slip in peer Lennar's (NYSE: LEN) backlogs, a 23% fall in KB Home's (NYSE: KBH) backlogs, or even a 5% rise in NVR's (NYSE: NVR) backlogs, all year on year in their respective second quarters. 

Going a little deeper
What I really like about Toll is its relatively healthy balance sheet as compared to peers.

Think of all those construction companies whose numbers have been stinky (read: slumping bottom line as well as top line), and who also hold high debt on their books. For instance, KB Home's second-quarter revenue plunged 27%, losses widened, and its total debt-to-equity ratio stands at 381.5%. PulteGroup's (NYSE: PHM) profits swung to losses in its second quarter, and its debt-to-equity ratio is at 164%. Even a smaller player like Beazer Homes' (NYSE: BZH) third-quarter losses more than doubled, and its ratio stands at a staggering 618%.

Comparatively, Toll has profits on its books, which rose this quarter, and its total debt-to-equity ratio is relatively lower at 62.8%. The company also has cash and marketable securities worth $1.18 billion.

Going even deeper, Toll's margins have now improved year on year in each of its last seven quarters. Its quarterly net income CAGR, which stood at -24.8% over five years, is now at a positive 54.2% over the past year. Toll's return on equity is at 6.5%, better than most other players.

The Foolish bottom line
I am not saying I am bullish on the housing sector currently. We all know we might still have a long wait before a visible recovery. But going by the books to find a longer term value, I think Toll could turn out to be the better of the lot once the sector starts improving.

What do you think?