During the Covid-19 pandemic, few stocks are as exciting as Pool Corp.
Solid interest rates, a wave of teleworking, and an ongoing outflow into the sunbelt have boomed residential pool construction, allowing wholesalers to serve nearly $ 20 billion in market value. According to the Pool & Hot Tub Alliance, an industry group, 96,000 underground pools were built in the United States last year. This is an increase compared to 78,000 in the previous year and thus exceeds the annual growth record set in 1983. Without supply and labor shortages, it could have been even higher. The construction alone cost around $ 4.6 billion, compared to $ 3.1 billion in the previous year. The enthusiasm seems to have lasted until 2021 despite significantly higher personnel and material costs.
And it wasn’t just a new build. Texas, which has multiple distribution centers in the Northeast and Midwest, suffered an unusual winter frost this year that damaged many pools. More than half of Pool Corp.’s sales does not require maintenance and repairs. On the other hand, existing pools usually have to be overhauled every 9-12 years. And now that many people are spending more time at home this year, as well as furniture and gardens, we’ve seen them upgrade their pools for purely aesthetic reasons. In addition, the high usage on weekdays also means that more chemicals are needed to treat the water.
Those chemicals are in short supply this year after a fire broke out last summer at a major US chlorine tablet maker. Other products are also experiencing rapid inflation. This helps Pool Corp. to be a relatively well-stocked bulk buyer and increase the company’s profitability when inventory levels are high due to such inflation. Analysts interviewed by FactSet have confirmed that Pool Corp. this year are 60% higher than in 2019, with operating margins increasing from 10.6% in 2019 to 14.8%.
Problem? Investors have jumped into the deep end with prices like all of these gains. Strong and steadily growing companies have achieved an average of 20.6 times the futures profits and 13.4 times the company value compared to their interest, taxes, depreciation and prepayment profits during their time as listed companies. I did. However, it has reached its highest level since the onset of the pandemic shopping and leisure habits and now, according to the same criteria, has a multiple of 33.6 and 24.2 times as much. It did not reach such numbers during the housing bubble in the mid to late 2000s when more pools were built, during the pre-pool boom.
The pool company’s share is on the springboard
Source link The pool company’s share is on the springboard