What happened

Shares of Pool Corporation (NASDAQ:POOL) rose 16.5% in July, according to data from S&P Global Market Intelligence. As second waves of COVID-19 broke out across the south and western U.S., Pool continued to benefit from people who were investing in their homes and pools this summer.

The company also reported second-quarter earnings on July 23, beating analyst expectations for both revenue and earnings per share, continuing the strong month for this 2020 market outperformer.

Two ducks stand by a beautifully-maintained subrban pool with mountains in the background.

Image source: Getty Images.

So what

During the second quarter, Pool saw its revenue rise 14% and earnings per share up 20%, or 23% on a fully adjusted basis, with both figures exceeding expectations. In addition, Pool Corporation raised its full-year earnings per share outlook (excluding impairments) from a range of $5.45-$6.05 to a new range of $7.05-$7.45, adding fuel to the already-baked-in optimism around its shares.

In the press release, Pool management stated simply, "As families are spending more time at home, our sales have benefited from greater swimming pool demand and usage, resulting in broad sales gains across our product categories and geographies."

Now what

According to management, 60% of all consumer spending on pools is recurring, including rebalancing chemicals, maintenance, repair, and cosmetic upkeep. As such, Pool's jolt of demand from COVID-19 could have favorable, long-lasting impacts on the company. That perhaps justifies the stock's sky-high 47 P/E ratio today.

While the stock is no doubt expensive, Pool also has a history of consistent growth and margin expansion, so investors should at least put this winning consumer discretionary stock on their watchlists, especially if the pandemic continues until next summer.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.