Sun Belt Migration Will Drive Recurring Pool Maintenance Demand

Key Takeaways

• Strategic expansion in high-growth regions and focus on recurring maintenance revenue enhances market share and supports stability amid changing demand cycles.
  
• Operational efficiencies from private label products, digital investment, and e-commerce adoption strengthen margins and long-term competitive positioning.
  
• Reliance on mature North American markets, persistent housing headwinds, evolving customer mix, inflation pressures, and shifting technology trends jeopardize long-term growth and earnings stability.

Catalysts

Distributes swimming pool supplies, equipment, related leisure, irrigation, and landscape maintenance products in the United States and internationally.

• Sustained migration to high-growth Sun Belt regions like Florida and Arizona-with POOLCORP increasing local branches and franchise presence-positions the company to capture outsized revenue and market share gains as demographic shifts boost both new installations and recurring maintenance activity.
  
• Growing consumer emphasis on home-based leisure and wellness is maintaining structurally elevated demand for pools and related services, driving resilient recurring revenue for maintenance and enhancements, which should support top-line stability and growth even during new construction lulls.
  
• Expansion of private label offerings (especially chemicals), alongside supply chain and digital platform investments (e.g., POOL360), are driving margin-enhancing product mix and operational efficiencies, supporting gross and net margin improvement over time.
  
• Increased adoption of e-commerce channels (POOL360 up to 17% of sales) and new location openings in dense pool markets are enabling customer retention, service differentiation, and efficient market penetration-strengthening competitive positioning and enhancing future earnings potential.
  
• The aging installed U.S. pool base continues to create steady, nondiscretionary demand for renovation, maintenance, and parts, partially insulating revenues from new build cyclicality and underpinning durable long-term earnings growth.

Pool Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Pool's revenue will grow by 3.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.7% today to 8.2% in 3 years time.
• Analysts expect earnings to reach $475.4 million (and earnings per share of $12.98) by about August 2028, up from $408.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.2x on those 2028 earnings, up from 28.3x today. This future PE is greater than the current PE for the US Retail Distributors industry at 24.6x.
• Analysts expect the number of shares outstanding to decline by 2.46% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.07%, as per the Simply Wall St company report.

Pool Future Earnings Per Share Growth

Risks

• Persistent high interest rates and a lack of anticipated rate cuts have suppressed housing turnover and new pool construction, with management expressing doubts about any material improvement in permits or new construction trends in the near-to-medium term. This trend poses a long-term headwind to revenue growth and limits upside in discretionary sales.
  
• The company's expansion remains heavily weighted to mature North American markets-with only modest growth and continued vulnerabilities to US housing market cycles; limited international diversification could result in more volatile revenues and earnings if domestic economic weakness persists.
  
• Demographic shifts and affordability constraints have led to a mix shift favoring higher-end pools and cash buyers, while entry-level demand remains under pressure due to rising costs and constrained financing. This dynamic may diminish PoolCorp's potential long-term addressable market, negatively affecting both top-line growth and margin expansion.
  
• Increasing consolidation among large pool builders and continued margin pressures from inflation in labor, transportation, and materials costs (without the ability to fully pass on these increases) threaten net margins; management acknowledged that price realization is only partially offsetting inflation and customer mix headwinds.
  
• Advancing technology in pool equipment and increased parts repair activity (versus full replacement) could structurally reduce the frequency of high-margin after-market purchases, potentially leading to softer long-term growth in maintenance revenues and lower earnings resilience.

Valuation

• The analysts have a consensus price target of $332.364 for Pool based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $375.0, and the most bearish reporting a price target of just $285.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $5.8 billion, earnings will come to $475.4 million, and it would be trading on a PE ratio of 29.2x, assuming you use a discount rate of 7.1%.
• Given the current share price of $309.56, the analyst price target of $332.36 is 6.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.