Pool Q3 Earnings: Is NasdaqGS:POOL Expensive at 29.1x Price/Book?

in EARNINGS/INVESTING IDEAS by

Pool Corporation (NasdaqGS:POOL) is scheduled to report Q3 earnings results before markets open for trading on October 22, 2020.

The company is expected to report earnings of $2.19/share on revenue of $992.2 million. The consensus earnings per share (EPS) of $2.19/share is based on a poll of 6 analysts and represents a growth in eps of 12.2% over the same quarter last year, when the company reported earnings of $1.95/share.

The revenue forecast of $992.2 million based on a poll of 8 analysts implies a year-over-year (YoY) growth in revenue of 10.4%. Last year the company reported $898.5 million in revenue for the quarter.

Expected to report EPS growth of 12.2% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $992.20 $898.50 10.4%
EPS $2.19 $1.95 12.2%

Earnings Call Trends

Historically, management has exceeded analyst expectations 6 out of the last 8 tracked quarters, and missed expectations 2 quarters.

What are your expectations from Pool Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $3.15 $3.72 18.1% Beat
Q1, 2020 $0.64 $0.71 11.7% Beat
Q4, 2019 $0.37 $0.44 20.4% Beat
Q3, 2019 $1.78 $1.95 9.3% Beat
Q2, 2019 $3.23 $3.22 −0.2% Missed
Q1, 2019 $0.64 $0.80 25.0% Beat
Q4, 2018 $0.44 $0.41 −7.1% Missed
Q3, 2018 $1.59 $1.66 4.6% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price did not react much to the update.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 23, 2020 $301.90 $304.27 0.8% Increase
April 23, 2020 $190.42 $213.50 12.1% Increase
February 13, 2020 $227.18 $233.55 2.8% Increase
October 17, 2019 $200.74 $217.46 8.3% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.67, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.67 implies a 0.4% chance of earnings manipulation.

Fundamentals And Technical Analysis

Pool Corporation is currently trading at $353.55/share, down −1.6% for the day. The company is trading at approximately 97.1% of its 52-week high of $363.98/share. The company’s stock price is up 16.2% since the last earnings report and up 0.4% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 66.43 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:POOL Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 49.54 and a forward P/E multiple of 48.31.

Pool Corporation’s current share price also implies a price-to-book (P/B) multiple of 29.11. The following table summarizes some other key fundamental ratios:

Data as of October 20, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $353.55
P/E Ratio 49.5x
P/E Ratio (Fwd) 48.3x
PEG Ratio 3.3
Total Debt / Total Capital 4.3%
Levered Free Cash Flow $395.3 million
EV / EBITDA 36.2x

Finbox

Pool Corporation is a large-cap stock with a market capitalization of $14.169 billion and a total enterprise value of $14.763 billion. The company operates in the Consumer Discretionary sector and the Distributors industry.

Pool Corporation distributes swimming pool supplies, equipment, and related leisure products in the United States and internationally. The company offers maintenance products, including chemicals, supplies, and pool accessories; repair and replacement parts for pool equipment, such as cleaners, filters, heaters, pumps, and lights; fiberglass pools, and spas and packaged pool kits comprising walls, liners, braces, and coping for in-ground and above-ground pools; pool equipment and components for new pool construction and the remodeling of existing pools; and irrigation and related products consisting of irrigation system components, and professional lawn care equipment and supplies. It also provides building materials, such as concrete, plumbing and electrical components, functional and decorative pool surfaces, decking materials, tiles, hardscapes, and natural stones for use in pool installations and remodeling; and commercial products, such as heaters, safety equipment, and commercial pumps and filters. In addition, the company offers discretionary recreational and related outdoor lifestyle products that enhance consumers’ use and enjoyment of outdoor living spaces, such as spas, grills, and components for outdoor kitchens. It serves swimming pool remodelers and builders; specialty retailers that sell swimming pool supplies; swimming pool repair and service businesses; irrigation construction and landscape maintenance contractors; golf courses; and commercial customers that serve hotels, universities, and community recreational facilities. As of December 31, 2019, the company operated 373 sales centers. Pool Corporation was founded in 1993 and is headquartered in Covington, Louisiana.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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