Pool Corporation

Based on the provided data, POOL presents a mix of concerning valuation signals and stronger underlying fundamentals.

From a technical perspective, the stock appears oversold, trading significantly closer to its 52-week low than its high. This recent weakness could represent a potential entry point for patient investors. Fundamentally, the company is sound, with healthy profit margins, a strong balance sheet, and manageable debt, though there are signs of moderating profitability and slower inventory turnover.

However, the valuation is a major concern. A forward P/E in the low 20s might be justifiable, but the extraordinarily high EV/EBITDA ratio and negative PEG ratio signal the market may be pricing in overly optimistic growth or that the stock is simply expensive. The lack of peer comparison data further clouds the valuation picture.

Recommendation:

While POOL's operational health is solid, its current valuation appears stretched based on key metrics like EV/EBITDA. The technical oversold condition suggests potential for a near-term bounce, but the high price relative to earnings growth expectations presents significant risk. Investors should wait for a more attractive valuation or clearer signs of accelerated earnings growth before considering a position. For now, a Hold rating is more appropriate. Potential investors might find better opportunities elsewhere until the valuation aligns more closely with its growth prospects.

RockFlow Model Forecast: Three Scenarios for 2026

Based on current analysis, here's a 12-month outlook for POOL:

Catalysts: The primary positive catalyst is the stock's technically oversold condition, which could lead to a near-term rebound if market sentiment improves or if the company demonstrates a return to stronger earnings growth. Its solid fundamental health, including strong profit margins and a robust balance sheet, provides a stable foundation.

Risks: The biggest risk is its demanding valuation, particularly the high EV/EBITDA ratio, which suggests the stock is expensive. If earnings growth continues to moderate, the share price could face significant downward pressure as it re-rates to a more reasonable valuation.

Outlook: The outlook is neutral to cautious. While operational strength may prevent a major decline, the stretched valuation limits substantial upside potential. A realistic trading range could be between $230 and $280, heavily dependent on the company's ability to meet or exceed growth expectations to justify its current price.

Wall Street Consensus

Most Wall Street analysts are optimistic about Pool Corporation's 12-month outlook, with consensus target around $218.36, indicating expected upside potential.

Overall, POOL has investment potential but also faces challenges. Here are key factors to weigh before investing.

POOL has demonstrated mixed performance with recent weakness offsetting earlier gains, trading well below its yearly highs despite modest longer-term resilience. The stock remains volatile relative to the broader market, as reflected by its beta above 1.0.

Over the past month, POOL declined 4.54%, though it edged up 0.45% over three months, slightly outperforming the market by 0.47% in that period. This suggests recent weakness may be a consolidation phase rather than sustained downturn relative to broader indices.

Currently trading at $255.46, POOL sits just 13% above its 52-week low and 32% below its high, indicating it is in oversold territory. The significant 37.21% maximum drawdown over the past year further supports this technically oversold condition.

Revenue & Profitability POOL demonstrates solid profitability with Q3 2025 net income margins of 8.75%, though this represents a moderation from Q2's stronger 10.89%. The company maintains healthy gross profit margins near 30%, indicating effective pricing power relative to its cost of goods sold. The sequential decline in profitability metrics from Q2 to Q3 suggests potential seasonal pressures or increased operational costs.

Financial Health The company maintains a conservative financial structure with a debt ratio of 39.7% and a strong current ratio of 2.57. Interest coverage remains robust at 14.8 times, indicating comfortable debt service capability. Operating cash flow coverage ratios are adequate, supporting the company's liquidity position and dividend payments.

Operational Efficiency POOL shows moderate operational efficiency with an ROE of 9.2% and asset turnover of 0.41. The inventory turnover of 0.84 suggests slower inventory movement, typical for seasonal pool supply businesses. The 95-day cash conversion cycle indicates efficient working capital management, though the high days inventory outstanding of 108 days warrants monitoring for potential inventory optimization opportunities.

Based on the provided metrics, POOL appears to be overvalued. While the trailing and forward P/E ratios in the low 20s might seem reasonable in isolation, other indicators paint a more concerning picture. The exceptionally high EV/EBITDA of over 67 and the negative PEG ratio, which suggests negative earnings growth expectations, are significant red flags pointing to an unsustainable valuation level.

A peer comparison cannot be conclusively performed due to the unavailability of industry average data. Without this contextual benchmark for metrics like P/E, EV/EBITDA, and PB ratio, it is impossible to determine whether POOL's valuation is aligned with or deviates from its industry peers. This lack of comparative data limits the ability to assess its relative valuation standing.

Volatility Risk: With a beta of 1.23, POOL exhibits higher volatility than the broader market, indicating amplified sensitivity to broader market swings. The substantial one-year maximum drawdown of -37.21% further underscores significant downside risk potential during adverse market conditions.

Other Risks: The absence of notable short interest suggests a low level of speculative bearish pressure. However, investors should still monitor company-specific operational performance and general macroeconomic factors, such as shifts in consumer discretionary spending affecting the pool industry.