IBD Stock Analysis
- Pool stock broke out from a 449.54 buy point Monday.
- Shares are bouncing above their upward-sloping 50-day line.
- The relative strength line spiked recently and holding near highs.
Industry Group Ranking
* Not real-time data. All data shown was captured at
2:19PM EDT on
Growth stocks of all sizes jumping past buy points were not in short supply Monday. The IBD Stock Of The Day Pool Corp. (POOL) was among those. Danaher (DHR), Intuitive Surgical (ISRG), Shopify (SHOP) and Microsoft (MSFT) stocks all snapped past buy points. Meanwhile, names including Adobe (ADBE), Intuit (INTU) and Zoetis (ZTS) extended their runs above recent breakouts.
Like many top growth stocks in the market right now, the chart shows a base-on-base pattern, with the current flat base forming entirely above support at the stock’s 10-week moving average (actually holding firm support at the stock’s 21-day exponential moving average.)
Both are bullish traits.
Still, the early breakout faded, leaving shares just a fraction above the buy point, up 1.9% at 450.32 on the stock market today. The move occurred in more than double-the stock’s average volume. And a fair amount of that volume kicked in during the downticks. That points to large investors taking profits when the stocks rallies.
Covington, La.-based Pool started life in 1980 as South Central Pool Supply. Through a number of permutations, the company became a pool supply industry consolidator, then expanded into irrigation and landscaping supplies. The company also provides products used in the prevention of runoff, flood, fire and other natural disasters.
Pool does not break out its revenue according to these various end markets.
Growth Stock, Cool Markets
Pool operates 398 sales and distribution centers in North America, Europe and Australia. More than 90% of revenue is generated in the U.S.
The number of swimming pools in the U.S. has slowly, steadily increased over the past decade. Estimates placed the number of in-ground pools at right around 5 million in 2010. By 2020, the number had grown to above 5.3 million, according to Pool’s 2020 1o-K filing.
About 60% of consumer spending in the pool industry is for maintenance and minor repair of existing pools. Another 25% goes to pool replacement and refurbishing. New swimming pools account for about 15% of industry revenue.
Pool’s revenue had increased at a single-digit growth rate for at least eight-years prior to 2020. In 2020, sales jumped 23%, as the pandemic lockdown spurred homeowners to spend more on maintaining and refurbishing their pools.
In preparing for the normal summer season, Pool had stockpiled a large inventory of supplies. So its deliveries suffered few interruptions.
At the same time, the company pared back operating costs wherever possible, in preparation for the possibility of harsh outcome to the pandemic economy. That drove 2020 capital expenditures to 65% of what they had been in 2019.
Pool Stock Fundamentals/Technicals
Annual earnings growth averaged 19.5% over the five years through 2019. It ran as high as 38% in 2018, and as low as 10% in 2017. In 2020, earnings per share jumped 45%. Analysts point to a 47% gain for 2021, over a 26% rise in revenue.
Pool stock soared more than 75% in 2020. This year so far, it has gained just over 20%. But it has managed that gain while spending all but two weeks mired in consolidations. A January to April consolidation reset the stock’s base count.
So the current flat base remains a first-stage pattern.
Pool ranks a best-possible 99 Composite Rating from IBD, and ranks No. 4 among the growth stocks in the Retail-Leisure Products industry group. Its Relative Strength Rating is a passable but unremarkable 83. The stock’s relative strength line, which compares a stock’s performance vs. the S&P 500’s, has recovered to its highest level since November, and is just off record highs — both strong signs as the stock executes a breakout.
Find Alan R. Elliott on Twitter @IBD_Aelliott
YOU MAY ALSO LIKE: