Home-centric Living And Climate Trends Will Fuel A Pool Renaissance

Key Takeaways

• Rapid dealer expansion, innovative products, and strong lead generation could help Latham outpace market growth and shift share from concrete to fiberglass pools.
  
• Technological, regulatory, and lifestyle trends position Latham for sustained margin gains, recurring revenues, and stable earnings through operational efficiencies and aftermarket demand.
  
• Vulnerability to economic pressures, regulatory changes, and shifting consumer preferences threatens sustained growth, margin stability, and long-term demand for traditional in-ground pools.

Catalysts

Designs, manufactures, and markets in-ground residential swimming pools in North America, Australia, and New Zealand.

• While analyst consensus expects growth in the Sand States to materialize gradually, Latham's accelerated dealer expansion, new region-specific product launches, and rapidly rising lead generation indicate the company could capture Sand State market share well ahead of schedule, potentially driving well above-consensus revenue growth and operating leverage over the next several years.
  
• Analyst consensus anticipates modest gains in fiberglass pool market share, but strong evidence of leading conversions of top concrete builders, robust consumer pull-through, and greater dealer engagement suggest Latham could drive an outsized and sustained shift from concrete to fiberglass pools, materially expanding both revenue and margins due to structural cost advantages.
  
• The stay-at-home lifestyle trend is showing stickiness, with rising interest in home-centric leisure driving not only higher initial pool demand but also accelerating aftermarket and replacement cycles (liners, covers, automation), which positions Latham for multi-year recurring revenue streams and enhanced earnings stability.
  
• Regulatory changes expanding autocover adoption as a safety alternative to fencing, paired with Latham's unmatched product breadth and effective marketing, are likely to unlock a wave of new demand in both new build and retrofit pools, structurally lifting average selling prices and gross margin profile.
  
• Latham's deployment of proprietary AI-powered tools (like Measure by Latham), ongoing manufacturing automation investments, and direct-to-consumer strategies set the stage for permanent step-changes in operational efficiency and dealer/customer acquisition, driving sustained margin expansion and sharply higher earnings even at mid-cycle industry volumes.

Latham Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Latham Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Latham Group's revenue will grow by 6.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -2.5% today to 5.3% in 3 years time.
• The bullish analysts expect earnings to reach $33.6 million (and earnings per share of $0.28) by about August 2028, up from $-13.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 44.3x on those 2028 earnings, up from -64.3x today. This future PE is greater than the current PE for the US Leisure industry at 23.3x.
• Analysts expect the number of shares outstanding to grow by 0.83% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.79%, as per the Simply Wall St company report.

Latham Group Future Earnings Per Share Growth

Risks

• Latham's reliance on new pool installations, particularly in higher-end markets, makes it vulnerable to economic headwinds such as rising interest rates, stagnant middle-class wages, and reduced access to home equity credit, all of which can shrink its addressable market and result in lower long-term revenue growth.
  
• Increased legislative and regulatory focus on water conservation and environmental sustainability-especially in growth target regions like the U.S. Sunbelt-could elevate operating and compliance costs or even limit new pool installations, posing a risk to both sales volume and operating margins going forward.
  
• Persistent cost inflation in key raw materials like fiberglass and resins, when coupled with a fragmented dealer network and mounting competitive pressures, may erode Latham's pricing power over time, leading to compressed gross and net margins in future years.
  
• The pool industry in the United States is already mature, with signs of market saturation, slower household formation in key demographics, and new build activity far below historical averages; this structural headwind could cap Latham's ability to meaningfully grow revenue above broader GDP trends in the long run.
  
• Technological disruptions and changing consumer preferences toward alternative recreational amenities or innovative substitutes (such as above-ground pools, experiential outdoor products, or wellness landscaping) could diminish demand for traditional in-ground pools, threatening Latham's core revenue base and long-term earnings power.

Valuation

• The assumed bullish price target for Latham Group is $10.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Latham Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $10.0, and the most bearish reporting a price target of just $5.5.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $635.2 million, earnings will come to $33.6 million, and it would be trading on a PE ratio of 44.3x, assuming you use a discount rate of 7.8%.
  
• Given the current share price of $7.31, the bullish analyst price target of $10.0 is 26.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.