Pool Corporation (POOL) short, mcap=$14.7bn, price $376 vs $307

POOL short pitch:
– Leading distributor of pool and outdoor living products.
– 40% of the company’s revenue is tied to new pool installations, major repairs and remodeling.
– The company has disproportionately benefited from the surge in COVID-related demand and is over-earning.
– Lead times on new installations have already contracted from 6 months to 6 weeks.
– Over the next couple of years, revenue per location set to revert to its pre-COVID trends, meaning a decline by approximately 28%.
– Gross margins are also set to revert from 32% to to pre-COVID levels of 29% as demand comes under pressure and the inflationary benefit reverses.
– Analyst EPS estimates are way too high.

POOL valuation:

– Driven by declines of revenue per location and gross margin reduction
– EPS is set to contract from $18.75 in 2022 to $11 in 2024.

Exp. gain:
Not specified.

Full write-up (free guest account required):