RBC Capital initiated coverage on Pool Corporation (NASDAQ:POOL) with an Outperform rating and a $408 price target.
The analysts said they’re drawn to the company’s potential for long-term growth as the leading wholesale distributor in an industry that benefits from migration to warmer climates where there is a higher tendency for pool ownership and backyard living features, as well as spending on technology-enabled pool content.
The company’s growth mainly comes from recurring revenue generated by maintenance and minor repair work on a continually increasing number of installed US pools, as well as remodeling and retrofitting work, given that the average US pool is 22 years old.
The company aims to achieve a 6%-9% organic revenue CAGR in the long run, which aligns with its eight-year historical trend (2012-2019), except for the extraordinary growth it experienced in 2020-22 due to the pandemic. The growth drivers include the increase in the overall number of installed pools, favorable pricing and product mix from higher-value technology pool content, gaining market share, opening new sales centers, and expanding the product line.