What happened

Shares of swimming pool products distributor Pool Corp (POOL 0.64%) rose by 22.4% in April, according to data provided by S&P Global Market Intelligence. The upward move followed the release of a super first-quarter earnings report.

Pool Corp describes itself as the "world's largest wholesale distributor of swimming pool and related backyard products," but in reality, it's primarily a North American operation. Of its 400 sales centers, just 22 are located in Europe and Australia. Moreover, of its 300 pool-focused sales centers in North America, 213 are in just four states: California, Florida, Texas, Arizona. Overall, 86% of its sales come from the North American pool market.

A girl in a swimming pool.

Discretionary spending on swimming pools surged during the pandemic. Image source: Getty Images.

That said, the U.S. pool market has been a great one to be in during the pandemic. Stay-at-home measures and social distancing have encouraged a boom in discretionary spending on the home and garden, and Pool Corp has been a significant beneficiary. Naturally, some investors have been concerned that the company's torrid growth would fade in 2021, but Pool reported a whopping 57% year-over-year increase in sales in the first quarter, and management believes the work-from-home trend will continue in 2021 even as the pandemic recedes in the U.S.

So what

Pool Corp bulls will point to the 2% increase in the installed base of pools and the substantial order backlogs at pool builders as evidence that these spending trends will continue beyond 2021. On the other hand, the bears will argue that Pool is trading at 35 times its estimated 2021 earnings during a year with growth rates that won't repeat for a long time to come.

Ultimately, that debate won't be resolved until investors see what kind of sales Pool actually generates in 2022 and beyond.

Now what

Given the remarkable nature of events in the last year or so, it's challenging to predict with any accuracy the degree to which 2020's spending trends will continue. As such, each earnings report from the company will be seized upon as providing evidence of where Pool's long-term sales growth is heading. That question open to debate, and investors will need to consider if they are willing to pay a premium valuation for this stock in order to be on the bullish side of the discussion.