Pool Corporation (POOL): This Swimming Pool Leader Is a Good Play in the Housing Recovery

Since the bottom of 2009, Pool Corporation (NASDAQ:POOL) has been on a rising trend, from nearly $11.60 per share in March 2009 to more than $53.50 per share. This company is in the portfolios of many famous investors including Joel Greenblatt and Jim Simons. Sandy Villere of Villere Balanced Fund was also bullish about this company, mentioning that it had a dominating position in the industry with its pricing power. Let’s take a closer look to determine whether or not we should buy Pool Corporation (NASDAQ:POOL) at its current trading price.

The leader in the pool niche market

Pool Corporation (NASDAQ:POOL) is considered the biggest swimming Pool Corporation (NASDAQ:POOL) supplies and equipment wholesale distributor, operating 312 sales centers in North America and Europe. The company has three of the biggest suppliers including Pentair Water Pool and Spa (18% of the total purchases), Hayward Pool Products (11%), and Zodiac Pool Systems (8%). In the past four years, Pool has consistently generated growing sales and net income. Its top line increased from $1.54 billion in 2009 to more than $1.95 billion in 2012, while net income rose from $19.2 million, or $0.39 EPS, to nearly $82 million, or $1.71 EPS, during the same period.

Currently, there are around 80 million U.S. homes that could have space for a swimming pool, but only around 9.6 million homes have pools. Thus, according to the company, there was a huge potential growth for swimming Pool Corporation (NASDAQ:POOL) equipment supplies and replacement. Its sales growth in the past two years was mainly due to the market share gain, along with the industry growth of 3% to 4%.

Looking forward, Pool Corporation (NASDAQ:POOL) expected that the industry would experience a growth rate of 4%-7% before it reverts back to the range of 3%-5% in the long run. The improvement in the housing market will help Pool in the long run. In the period of 2013-2010, U.S. new pool construction was projected to have a consistent growth, supported by the overall housing recovery. Pool is trading at around $53 per share, with a total market cap of around $2.4 billion. The market values Pool at nearly 20.6 times its forward earnings.

Fast-growing Tile Shop

Pool is quite a good stock to play the ongoing recovery in the U.S. Another two stocks that would benefit substantially from this recovery trend are Tile Shop Hldgs, Inc. (NASDAQ:TTS) and The Home Depot, Inc. (NYSE:HD).