Pool Corp (POOL, Financial) has experienced a slight dip of -2.64% in its stock price, yet it maintains a 3-month gain of 3.21%. With an Earnings Per Share (EPS) of 13.82, investors are pondering whether the stock is modestly undervalued. This article delves into the valuation analysis of Pool Corp (POOL), providing readers with a comprehensive overview of its financial health and growth prospects. Continue reading for an in-depth analysis of Pool Corp's intrinsic value.
Company Introduction
Pool Corp distributes swimming pool supplies and related products, catering to a broad customer base that includes pool builders, remodelers, independent retail stores, and pool repair and service companies. With a vast array of products ranging from essential maintenance items to pool equipment, Pool Corp has established itself as a key player in the industry. The current stock price of $354.12 stands against a GF Value of $422.9, suggesting that the company might be trading at a discount. This valuation gap sets the stage for a deeper investigation into the intrinsic value of Pool Corp.
Summarize GF Value
The GF Value is a unique valuation tool that provides an estimate of a stock's intrinsic value based on historical trading multiples, an adjustment factor reflecting past performance, and future business performance predictions. For Pool Corp (POOL, Financial), the GF Value suggests the stock is modestly undervalued with a fair value of $422.9. This is derived from its current market cap of $13.70 billion and its price of $354.12 per share. With Pool Corp's stock price below the GF Value Line, there is a potential for higher future returns, given the company's sustained business growth.
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Financial Strength
When considering an investment, the financial strength of a company is crucial to minimize the risk of capital loss. Pool Corp's cash-to-debt ratio of 0.06 is lower than the majority of its peers in the Industrial Distribution industry. Despite this, Pool's overall financial strength is deemed fair, with a GuruFocus ranking of 6 out of 10. Investors should observe the company's debt and cash trends over the years to assess financial stability.
Profitability and Growth
Consistent profitability is a sign of a lower-risk investment. Pool Corp has not only been profitable for the past decade but also boasts a high operating margin of 13.76%, outperforming 89.66% of its industry competitors. The company's strong profitability is complemented by impressive growth rates. With an average annual revenue growth of 25.6% and a 3-year average EBITDA growth of 43.4%, Pool Corp's growth is robust, ranking higher than most in its sector.
ROIC vs WACC
Assessing a company's profitability can also be done by comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). Pool Corp's ROIC of 20.01 is significantly higher than its WACC of 11.15, indicating that the company is generating substantial value for its shareholders.
Conclusion
Based on the analysis, Pool Corp (POOL, Financial) appears to be modestly undervalued. The company's financials are solid, profitability is high, and growth is commendable compared to its industry peers. For a more detailed look into Pool Corp's financials, investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
