Please ensure Javascript is enabled for purposes of website accessibility

Why Pool Corporation Rose 16.5% in July

By Billy Duberstein – Aug 10, 2020 at 8:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

People are investing in their pools while stuck at home this summer.

What happened

Shares of Pool Corporation (POOL 0.77%) 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.

Billy Duberstein has no position in any of the stocks mentioned. The Motley Fool recommends Pool. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Pool Corporation Stock Quote
Pool Corporation
POOL
$318.21 (0.77%) $2.43

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.