Pool Corp. (POOL) Hits Fresh High: Is There Still Room to Run?

Shares of Pool (POOL) have been strong performers lately, with the stock up 13% over the past month. The stock hit a new 52-week high of $371.17 in the previous session. Pool has gained 64.9% since the start of the year compared to the -1.7% move for the Zacks Consumer Discretionary sector and the 89.9% return for the Zacks Leisure and Recreation Products industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 22, 2020, Pool Corp. reported EPS of $2.71 versus consensus estimate of $2.14 while it beat the consensus revenue estimate by 15.11%.

For the current fiscal year, Pool Corp. is expected to post earnings of $7.25 per share on $3.58 billion in revenues. This represents a 13.28% change in EPS on a 11.89% change in revenues. For the next fiscal year, the company is expected to earn $8.14 per share on $3.9 billion in revenues. This represents a year-over-year change of 12.24% and 9.01%, respectively.

Valuation Metrics

Pool Corp. may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Pool Corp. has a Value Score of D. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 48.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 52.5X versus its peer group's average of 15.4X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Pool Corp. currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Pool Corp. meets the list of requirements. Thus, it seems as though Pool Corp. shares could have a bit more room to run in the near term.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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