Yahoo Finance Should You Be Adding Pool (NASDAQ:POOL) To Your Watchlist Today?
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
In contrast to all that, many investors prefer to focus on companies like Pool (NASDAQ:POOL), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Pool
How Quickly Is Pool Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Pool's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 45%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. EBIT margins for Pool remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 20% to US$6.1b. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Pool.
Are Pool Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Any way you look at it Pool shareholders can gain quiet confidence from the fact that insiders shelled out US$311k to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. Zooming in, we can see that the biggest insider purchase was by CEO, President & Director Peter Arvan for US$194k worth of shares, at about US$387 per share.
The good news, alongside the insider buying, for Pool bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth US$380m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, Pete Arvan is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Pool, with market caps over US$8.0b, is around US$13m.
The Pool CEO received total compensation of just US$5.6m in the year to December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is Pool Worth Keeping An Eye On?
Pool's earnings have taken off in quite an impressive fashion. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Pool belongs near the top of your watchlist. It is worth noting though that we have found 3 warning signs for Pool that you need to take into consideration.
Keen growth investors love to see insider buying. Thankfully, Pool isn't the only one. You can see a a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
