POOL Corp (POOL) is heating up despite the cold temperatures. The stock is a Zacks #1 Rank (Strong Buy).
Company Description
Pool Corporation operates as a wholesale distributor of swimming pool supplies, equipment, and related leisure products. It also distributes irrigation and landscape products. The company offers approximately 160,000 national brand and its own-branded products.
Earnings Surprises in 5 of the last 6 quarters
POOL has beat the Zacks Consensus Estimate in five of the last six quarters, with the December 2010 quarter being the only time the company merely met expectations. Another factor to consider is the top line beats of the last three quarters, which have averaged 5% ahead of expectations.
Price action following the beats and the single met are not what one might expect. A beat of 87% in the March 2011 quarter resulted in the largest move in the stock price, a meager 7% move. So don’t expect a big splash following earrings.
Seasonally Weak
The June quarter for POOL is much like the December quarter for retailers. It’s a make or break time for the company that generally comes off of two quarters of negative earnings in December and March. The September quarter normally runs about 40% of the June quarter.
Seasonality plays a big role for the pool business. Even though is cold right now (in many parts of the United States), people are making plans for pools construction in the summer months. The recent good news in the housing sector should also alert investors to possible outperformance for companies like POOL. This makes us believe that now is the time to tip your toes into POOL.
POOL trades at a premium to the industry in terms of both trailing and forward earnings. A healthy premium can be found in the price to book metric, where POOL trades at 5x compared to 1.8x for the industry.
When looking at price to sales, the company trades at sizeable discount to the market. At 0.87x Price to sales, POOL compares favorably to the industry average of 1.73x, suggesting a slight expansion of that multiple could move the stock several points.
The Chart
POOL has ten analysts following the company, and estimates have led stocks higher over the last year. A look at the price and consensus chart below shows a consistent trend of higher earnings expectations and a higher stock price. POOL is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service
