The pool company’s stock is on the diving board

During the Covid-19 pandemic, few actions are as exhilarating as the Pool Corp action.

Strong interest rates, a wave of telecommuting and a continued flight to the Sun Belt have caused residential swimming pool construction to explode, allowing wholesalers with a market value of nearly $ 20 billion to serve. According to the Pool & Hot Tub Alliance, an industry group, 96,000 underground swimming pools were built in the United States last year. This is an increase from 78,000 the previous year, surpassing the annual growth record dating back to 1983. Without supply and labor constraints, it could have been even higher. Construction alone cost about $ 4.6 billion, up from $ 3.1 billion the year before. The enthusiasm appears to have continued through 2021, despite much higher labor and material costs.

And it wasn’t just a new build. Texas, which has a combined number of distribution centers in the northeastern and midwestern United States, suffered an unusual winter freeze this year, damaging many swimming pools. More than half of Pool Corp’s sales. are related to maintenance and repairs. On the other hand, existing swimming pools generally need to be serviced every 9 to 12 years. And now that many people are spending more time at home this year, along with furniture and gardens, we’ve seen them modernize their pools for purely cosmetic reasons. Additionally, high weekday usage also means more chemicals are needed to treat the water.

These chemicals are scarce this year after a fire broke out last summer at a major US supplier of chlorine tablets. Other products are also experiencing rapid inflation. It helps Pool Corp. to be a relatively well-stocked bulk buyer and helps increase the profitability of the business when stocks are high due to such inflation. Analysts polled by FactSet confirmed that Pool Corp. are 60% higher this year than in 2019, with operating margins dropping from 10.6% in 2019 to 14.8%.

problem? Investors have jumped in with prices like all of these profits. Strong, steadily growing companies enjoyed an average of 20.6 times forward earnings and 13.4 times the value of the business relative to their interest, taxes, depreciation and pre-amortization earnings during their tenure as than public companies. I did. However, it has reached the highest level since pandemic shopping and leisure habits took hold, and now counts multiples of 33.6 and 24.2 times, respectively, by the same criteria. During the real estate bubble of the mid to late 2000s when more swimming pools were built, during the boom before swimming pools were built, it didn’t approach such numbers.

The pool company’s stock is on the diving board

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