This section of the pool has received great reinforcement. Why it is still worth buying.

During the great shortage of children’s pool in 2020, parents were widely looking for opportunities to cool and entertain children through locking. Plastic bathtubs may soon be forgotten in the garage, but consumers who have installed the right thing will pay for pool maintenance for years to come, pandemic or not. And that’s great news for

Pool Corp.

Shares Pool Corp. (code: POOL), which distributes pool supplies and equipment used by professionals to maintain, renovate and replace the pool, is not easily delayed. As an obvious beneficiary of the Covid-19 pandemic, stocks rose 130% from their March 2020 low to a high in November. Yet, like many stocks that remain at home, it has sold on recent headlines about a potential coronavirus vaccine – it has fallen 7% since its peak, to about $ 365 recently.

With continuous locking and pools that need maintenance, it is an opportunity for investors to return to an industry leader with an extremely stable growth outlook.

Pool Corp., headquartered in Covington, La., With a market value of nearly $ 15 billion, did not need a pandemic to boost its business. In the five years ended 2019, the company’s sales grew by 8% annually, helping its shares return at an annual rate of 29% over that period, more than double that of

S&P 500 indexes

12% annual return.

Almost 60% of Pool Corp. comes from non-discrete items for existing pools – such as chemicals, maintenance and repairs – and an additional 24% comes from the replacement or refurbishment of these existing pools. This creates the kind of recurring revenue that Wall Street likes to see.

Coronavirus locking has taken the company’s business to a new level. In October, Pool Corp., whose largest markets are California, Texas and Arizona, beat its earnings forecast and predicted it would earn between $ 8.20 and $ 8.50 per share year-over-year, compared to an earlier range of 7 , 05 to $ 7.45.

The recent stock drop had nothing to do with her finances. The decline fell 16% on Nov. 9, after Pfizer first said its Covid-19 vaccine was at least 90% effective as investors worried the company could continue post-pandemic strong growth.

It seems that for Pool Corp. the answer is unequivocal yes. First, the increase in demand for new pools is probably not over. Consider the backlog at Blue Haven Pools & Spas, a supplier in Jacksonville, Fla. In a recorded message, the company invites calls to be reserved for the next two or three months. Add construction time and it will be at least five or six months before homeowners can go swimming.

“Pool-focused contractors are crowding in,” says Pool Corp. CFO Mark Joslin. “It can never be quantified, it’s all an anecdote, but it’s an anecdote [the contractors] I have never seen a market like this. “

Covid has also led to an increase in home ownership, especially in the suburbs, notes Sandy Villere, partner and portfolio manager at Villere & Co. Even if they have the vaccine, families may still prefer the comfort of a home to a public pool. He also points out that more and more people are moving to the state of Sunbelt, where the bathing season is longer. And the lifespan of a pool, wherever it was built, is not that long.

“There are approximately 5.5 million pools [in the U.S.], and they need to be replaced or renewed every seven to 10 years, ”says Villere.

The pool is not very cheap. It trades at just under 40 times earnings next year, representing an 80% premium for the S&P 500. But Pool Corp. has always commanded the assessment of premiums for its growth and business stability – the company has not lost money since at least 1994.

“Every time any new space is put in, the installed base grows and becomes another recurring annuity for Pool Corp.,” says Villere. “This is non-discretionary consumption and people pay for the maintenance of these pools, much like people pay for phone bills or electricity / light bills.”

KeyBanc Capital Markets analyst Kenneth Zener calls Buy Corp Pool Corp. “expensive, but worth it”. He raised the target price to 400 from 335, after the company reported strong results in the third quarter in October. He models sales growth of 11% for 2021, higher than recent history, and believes Pool Corp. it can trade approximately 44 times more than the estimated earnings in 2021 of $ 9 per share.

The market certainly seems optimistic for the industry as a whole:

Leslie’s

(LESL), a smaller pool company, jumped 30% during its first public offering in October. Originally priced at $ 14 to $ 16 per share, it rose to $ 17 per share, opened above $ 20 and now trades at $ 28.17. Leslie’s traded about 52 times the estimated earnings from 2021.

If Pool Corp. can make up half of that gap in the 2021 earnings estimate of $ 9.19, his stock could be worth $ 423, 16% more than where it closed on Wednesday. If earnings in 2022 were $ 10.29, it would be worth $ 473, which is 30% more.

Yes, the shares of Pool Corp. there are a lot of bumps – but it’s not too late to dive.

Write to Teresa Rivas at [email protected] and Al Root at [email protected]

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