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Have you recently come across a windfall of money, moved on from some losing stocks, booked profits on a big winner, or simply set some money aside from your paycheck and are looking for ways to deploy new capital? Then this article is for you.
Here's one stock idea to consider as you enter the new year. While no stock is without risk, this company is a time-tested, high-quality operator that has performed exceptionally well over the long haul. In addition, it pays a reasonable dividend, is repurchasing its shares, and looks like an attractive investment today.
The stock is none other than swimming-pool supplier Pool Corporation (NASDAQ: POOL). Due primarily to the Federal Reserve's economic tightening measures throughout most of 2023 and 2024, the company's growth turned to declines in recent years, and shares have had a rough few years. The stock looks compelling at its current valuation -- a rare find in a frothy market like the one we're in today.
Let's take a closer look at what makes this idea worth further consideration and research and, potentially, an investment.
Why Pool Corporation shares are down this year
On the surface, Pool Corporation's recent quarterly results may scare some prospective investors away. Third-quarter sales declined 3% year over year. But a more proper analysis of this stock requires looking into what's going on underneath the surface.
The issue weighing on results has been a higher-interest-rate environment's impact on the construction and remodel supplies portion of the company's business. While its commercial construction and remodel business is holding up well, along with demand for luxury residential projects, weakness remains pronounced in lower-budget residential projects. This is because these customers are typically more price-sensitive to interest rates' impact on the monthly payments for financed projects.
A silver lining
Investors should realize that supplies going to new construction only go to about 14% of its end customers, and approximately 24% of sales go to renovation and remodeling. The bulk of end customers (about 62%) buy from Pool Corporation for maintenance purposes, where interest rates have little sway on sales trends.
To this end, for the full year of 2024, the company has guided for sales related to new construction units to be down 15% to 20%. In its third-quarter presentation, management said sales related to renovations and remodeling are expected to decline as much as 15%, and maintenance sales are expected to show flat or "slight growth" for the year.