Back To The Beginning: Pool Corp
Taking another quick look at a serial compounder (nearly) 2 years later
My first post on Substack was about Pool Corp (POOL) in January 2024. Since then, the company’s growth has slowed, which has been tightly tied to the state of the housing market.
Sometimes you’re early. Sometimes you’re wrong. Sometimes that’s the same thing.
The benefit of being a long-term investor is that I don’t have anyone telling me I need to sell POOL because of short-term underperformance. If POOL goes on a tear over the next few years, I won’t care that it went nowhere for the first few years I owned it. To be clear, I do care now - it’s hard not to. But I’d rather think about tomorrow than today. So let’s dive into it.
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Revenue and Profit Margin
If we normalize from the COVID bump that POOL saw, we still see significantly increased revenue and higher profit margins over the past 12 months than pre-COVID. This seems like a company returning to earth more than in decline (we’ll look at some other numbers to confirm that, of course, as this is just one piece of the data).
As StockOpine points out in their recent article, POOL’s revenue is increasing for the first time in 9 quarters (this is a great read, I would highly recommend). And it has 2 quarters consecutively now of positive growth.
Debt and Cash
Pool Corp has been able to weather this storm - its level of long-term debt is still under 3x FCF. They are in a strong position for when things rebound.
Potential Housing Market Policy Changes
I try not to think too much about macroeconomics, but I do have a few thoughts here. Regardless of what you might think of the policies, there are likely to be significant housing policy reforms next year. President Trump will likely be pushing for lower interest rates, portable mortgages, and potentially even 50-year mortgages. These policies are all aimed at the affordability of housing. We will have to wait to see the level of effectiveness.
Valuation
If I make a few assumptions that POOL’s performance returns to a more normalized environment, I think they are trading almost exactly at a 10 CAP from a valuation point of view. This is not factoring in any real significant, sustained growth that we know POOL is capable of in the past.
Conclusion:
I am happy to continue to hold POOL. My cost basis is $329.39 (with dividends), so I do feel as though I was early. But I am excited to see where this company goes.
DISCLAIMER!
Remember: This is not financial advice! I am not a financial advisor and have not considered your personal financial situation as your fiduciary. All content shared, including analysis, the Libertalia Investing Course, and discussion are for general information, educational and entertainment purposes only.
Please note that any opinions expressed here, whether by me or other participants, are solely our personal views. They should not be construed as specific financial or investing advice. Every investor’s situation is unique, and you should always conduct your own research and/or consult with a licensed financial professional before making any investment decisions.
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