Pool (POOL)

Swimming pool distributor Pool (NASDAQ:POOL) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 1.3% year on year to $1.45 billion. Its GAAP profit of $3.40 per share was in line with analysts’ consensus estimates.

Company Overview

Founded in 1993 and headquartered in Louisiana, Pool (NASDAQ:POOL) is one of the largest wholesale distributors of swimming pool supplies, equipment, and related leisure products.

Some consumer discretionary companies don’t fall neatly into a category because their products or services are unique. Although their offerings may be niche, these companies have often found more efficient or technology-enabled ways of doing or selling something that has existed for a while. Technology can be a double-edged sword, though, as it may lower the barriers to entry for new competitors and allow them to do serve customers better.

Pool’s primary competitors include Leslie's (NASDAQ:LESL), Hayward Holdings (NYSE:HAYW), Pentair (NYSE:PNR), and Fluidra S.A. (BME:FDR).

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Pool’s sales grew at a sluggish 7.5% compounded annual growth rate over the last five years. This was below our standard for the consumer discretionary sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Pool’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 3.1% annually.

This quarter, Pool grew its revenue by 1.3% year on year, and its $1.45 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 3.3% over the next 12 months. Although this projection indicates its newer products and services will catalyze better top-line performance, it is still below average for the sector.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Pool’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 11.5% over the last two years. This profitability was higher than the broader consumer discretionary sector, showing it did a decent job managing its expenses.

This quarter, Pool generated an operating margin profit margin of 12.3%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Pool’s unimpressive 6.6% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

In Q3, Pool reported EPS of $3.40, up from $3.27 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Pool’s full-year EPS of $10.97 to grow 4.9%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Pool has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 9%, subpar for a consumer discretionary business.

Pool’s free cash flow clocked in at $266.6 million in Q3, equivalent to a 18.4% margin. The company’s cash profitability regressed as it was 3 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t put too much weight on this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends are more important.

Over the next year, analysts predict Pool’s cash conversion will slightly improve. Their consensus estimates imply its free cash flow margin of 7.5% for the last 12 months will increase to 7.9%, it options for capital deployment (investments, share buybacks, etc.).

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Pool hasn’t been the highest-quality company lately because of its poor top-line performance, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 28.3%, splendid for a consumer discretionary business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Pool’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Pool reported $128.5 million of cash and $340.8 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $659.6 million of EBITDA over the last 12 months, we view Pool’s 0.3× net-debt-to-EBITDA ratio as safe. We also see its $21.61 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

Revenue, EPS, and EPS guidance were all in line. Zooming out, we think this was a quarter without many surprises, good or bad. The stock remained flat at $297.77 immediately after reporting.

Updated: December 3, 2025 at 9:51 PM EST

Are you wondering whether to buy Pool or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

We cheer for all companies serving everyday consumers, but in the case of Pool, we’ll be cheering from the sidelines. To kick things off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, Pool’s Forecasted free cash flow margin suggests the company will have more capital to invest or return to shareholders next year, and its organic sales performance has disappointed.

Pool’s P/E ratio based on the next 12 months is 21.3x. At this valuation, there’s a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $329.27 on the company (compared to the current share price of $245.99).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.