Pool Corp. Can Rebound and Flourish

The pandemic has caused a surge in demand for items such as boats, grills, and exercise equipment, as well as swimming pools due to low rates, increased savings, and the need for socially distanced leisure activities.

However, unlike the other categories, the people who provide the necessary equipment for swimming pools are not seeing the same financial benefit as the bonanza experienced by the other categories, and this lack of benefit is expected to continue.

‍
Pool Corp. has seen a decrease of 2.19% in their stock.
Pool Corp., the world's largest distributor of supplies and equipment for the sector, had been a successful stock due to its well-managed operations. However, its performance skyrocketed when the Covid-19 pandemic began, with a total return of 177% between the start of 2020 and its all-time high in November. The Pool & Hot Tub Alliance reported that new pool construction was on its way to breaking a record with 117,000 inground pools built in North America for 2021, although the number would have been higher if not for labor shortages. Pool Corp.'s earnings per share increased to $15.18 in 2020 from $5.83 in 2019, and its revenue rose to approximately $5.3 billion from $3.2 billion.

‍
The festivities are coming to an end. In October, Peter Arvan, the Chief Executive Officer, informed investors that the construction of new pools in North America is projected to decrease by 10-15% in 2020. In March, analysts from FactSet predicted that the company's revenue would increase to $6.9 billion, however, that prediction has been decreasing and is now estimated to be $6.07 billion.

‍
Pool Corp. generates a fifth of its revenue from construction, and another fifth from renovation and remodeling. During the early days of the pandemic, many people decided to upgrade their homes, leading to an increase in remodeling projects. However, the average North American pool is still around 25 years old. The remaining revenue comes from maintenance and repair services, which are less discretionary. Last year, Pool Corp. acquired the owner of Pinch A Penny, a pool-goods retailer, thus expanding its business beyond wholesale.

‍
Since the stock has dropped 46% since its peak last year, it is time to reevaluate the situation. The installation of swimming pools has increased by 6% since the pandemic began, and goods inflation has risen by 30%, which has likely given revenue a permanent boost. Unlike leisure items such as boats, golf clubs, and exercise machines, immovable inground pools do not enter a secondhand market after a boom. Technology is also a positive factor, as pool owners can now save time with automated maintenance equipment that was not available in the past.

‍
Investors appear to have grouped Pool Corp. with other companies that have benefited from the Covid-19 pandemic. Its forward price-to-earnings ratio is currently 18.5 times, which is much lower than its 15-year average of nearly 30 times, as reported by FactSet. Additionally, its forward multiple of enterprise value to earnings before interest, tax, depreciation and amortization is 14 times, which is significantly lower than the 22 times it was before the pandemic started.
It is time to take the plunge again.