Intrinsic value of Pool Corporation - POOL

Previous Close

$186.96

  Intrinsic Value

$52.05

stock screener

  Rating & Target

str. sell

-72%

Previous close

$186.96

 
Intrinsic value

$52.05

 
Up/down potential

-72%

 
Rating

str. sell

We calculate the intrinsic value of POOL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 7.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
Revenue, $m
  3,190
  3,390
  3,597
  3,814
  4,040
  4,275
  4,521
  4,777
  5,045
  5,324
  5,617
  5,922
  6,242
  6,576
  6,926
  7,292
  7,675
  8,077
  8,498
  8,939
  9,401
  9,886
  10,393
  10,926
  11,485
  12,070
  12,685
  13,329
  14,005
  14,715
Variable operating expenses, $m
  2,742
  2,912
  3,090
  3,275
  3,467
  3,668
  3,878
  4,096
  4,325
  4,563
  4,793
  5,053
  5,326
  5,611
  5,910
  6,222
  6,550
  6,892
  7,252
  7,628
  8,022
  8,436
  8,869
  9,323
  9,800
  10,300
  10,824
  11,374
  11,951
  12,557
Fixed operating expenses, $m
  111
  114
  116
  119
  122
  124
  127
  130
  133
  135
  138
  142
  145
  148
  151
  154
  158
  161
  165
  168
  172
  176
  180
  184
  188
  192
  196
  200
  205
  209
Total operating expenses, $m
  2,853
  3,026
  3,206
  3,394
  3,589
  3,792
  4,005
  4,226
  4,458
  4,698
  4,931
  5,195
  5,471
  5,759
  6,061
  6,376
  6,708
  7,053
  7,417
  7,796
  8,194
  8,612
  9,049
  9,507
  9,988
  10,492
  11,020
  11,574
  12,156
  12,766
Operating income, $m
  336
  363
  391
  420
  451
  483
  516
  551
  587
  625
  685
  727
  771
  817
  865
  915
  968
  1,023
  1,082
  1,143
  1,207
  1,274
  1,345
  1,419
  1,497
  1,578
  1,664
  1,755
  1,849
  1,949
EBITDA, $m
  376
  404
  434
  464
  496
  530
  564
  601
  639
  679
  720
  764
  810
  858
  908
  961
  1,016
  1,074
  1,135
  1,198
  1,265
  1,336
  1,409
  1,487
  1,568
  1,654
  1,743
  1,838
  1,937
  2,041
Interest expense (income), $m
  8
  36
  40
  43
  47
  51
  55
  59
  64
  69
  74
  79
  84
  90
  95
  102
  108
  115
  122
  129
  137
  145
  153
  162
  172
  181
  192
  202
  214
  225
  238
Earnings before tax, $m
  300
  324
  348
  373
  400
  428
  457
  487
  519
  552
  607
  643
  681
  721
  763
  807
  853
  902
  952
  1,006
  1,062
  1,121
  1,182
  1,247
  1,315
  1,387
  1,462
  1,541
  1,624
  1,711
Tax expense, $m
  81
  87
  94
  101
  108
  115
  123
  131
  140
  149
  164
  174
  184
  195
  206
  218
  230
  243
  257
  272
  287
  303
  319
  337
  355
  374
  395
  416
  438
  462
Net income, $m
  219
  236
  254
  273
  292
  312
  333
  356
  379
  403
  443
  469
  497
  526
  557
  589
  623
  658
  695
  734
  775
  818
  863
  910
  960
  1,012
  1,067
  1,125
  1,185
  1,249

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,320
  1,403
  1,489
  1,579
  1,672
  1,770
  1,871
  1,977
  2,088
  2,204
  2,325
  2,451
  2,583
  2,722
  2,867
  3,018
  3,177
  3,343
  3,517
  3,700
  3,891
  4,092
  4,302
  4,522
  4,754
  4,996
  5,250
  5,517
  5,797
  6,091
Adjusted assets (=assets-cash), $m
  1,320
  1,403
  1,489
  1,579
  1,672
  1,770
  1,871
  1,977
  2,088
  2,204
  2,325
  2,451
  2,583
  2,722
  2,867
  3,018
  3,177
  3,343
  3,517
  3,700
  3,891
  4,092
  4,302
  4,522
  4,754
  4,996
  5,250
  5,517
  5,797
  6,091
Revenue / Adjusted assets
  2.417
  2.416
  2.416
  2.415
  2.416
  2.415
  2.416
  2.416
  2.416
  2.416
  2.416
  2.416
  2.417
  2.416
  2.416
  2.416
  2.416
  2.416
  2.416
  2.416
  2.416
  2.416
  2.416
  2.416
  2.416
  2.416
  2.416
  2.416
  2.416
  2.416
Average production assets, $m
  217
  230
  245
  259
  275
  291
  307
  325
  343
  362
  382
  403
  424
  447
  471
  496
  522
  549
  578
  608
  639
  672
  707
  743
  781
  821
  863
  906
  952
  1,001
Working capital, $m
  641
  681
  723
  767
  812
  859
  909
  960
  1,014
  1,070
  1,129
  1,190
  1,255
  1,322
  1,392
  1,466
  1,543
  1,623
  1,708
  1,797
  1,890
  1,987
  2,089
  2,196
  2,308
  2,426
  2,550
  2,679
  2,815
  2,958
Total debt, $m
  732
  800
  870
  944
  1,021
  1,100
  1,184
  1,271
  1,362
  1,457
  1,556
  1,659
  1,768
  1,881
  2,000
  2,124
  2,255
  2,391
  2,534
  2,683
  2,840
  3,005
  3,177
  3,358
  3,547
  3,746
  3,955
  4,173
  4,403
  4,644
Total liabilities, $m
  1,083
  1,150
  1,221
  1,295
  1,371
  1,451
  1,534
  1,621
  1,712
  1,807
  1,906
  2,010
  2,118
  2,232
  2,351
  2,475
  2,605
  2,741
  2,884
  3,034
  3,191
  3,355
  3,528
  3,708
  3,898
  4,097
  4,305
  4,524
  4,754
  4,994
Total equity, $m
  238
  253
  268
  284
  301
  319
  337
  356
  376
  397
  418
  441
  465
  490
  516
  543
  572
  602
  633
  666
  700
  737
  774
  814
  856
  899
  945
  993
  1,043
  1,096
Total liabilities and equity, $m
  1,321
  1,403
  1,489
  1,579
  1,672
  1,770
  1,871
  1,977
  2,088
  2,204
  2,324
  2,451
  2,583
  2,722
  2,867
  3,018
  3,177
  3,343
  3,517
  3,700
  3,891
  4,092
  4,302
  4,522
  4,754
  4,996
  5,250
  5,517
  5,797
  6,090
Debt-to-equity ratio
  3.080
  3.170
  3.250
  3.320
  3.390
  3.460
  3.510
  3.570
  3.620
  3.670
  3.720
  3.760
  3.800
  3.840
  3.880
  3.910
  3.940
  3.970
  4.000
  4.030
  4.060
  4.080
  4.100
  4.120
  4.150
  4.170
  4.180
  4.200
  4.220
  4.240
Adjusted equity ratio
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  219
  236
  254
  273
  292
  312
  333
  356
  379
  403
  443
  469
  497
  526
  557
  589
  623
  658
  695
  734
  775
  818
  863
  910
  960
  1,012
  1,067
  1,125
  1,185
  1,249
Depreciation, amort., depletion, $m
  40
  41
  42
  44
  45
  47
  48
  50
  51
  53
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  68
  72
  75
  79
  83
  87
  92
Funds from operations, $m
  259
  277
  297
  316
  337
  359
  382
  405
  430
  456
  478
  506
  536
  567
  600
  635
  671
  709
  748
  790
  834
  880
  928
  979
  1,032
  1,088
  1,146
  1,208
  1,273
  1,341
Change in working capital, $m
  39
  40
  42
  44
  45
  47
  49
  52
  54
  56
  59
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
  124
  130
  136
  143
Cash from operations, $m
  221
  237
  255
  273
  292
  312
  332
  354
  376
  400
  419
  445
  472
  500
  530
  561
  594
  628
  664
  701
  741
  782
  826
  872
  920
  970
  1,023
  1,079
  1,137
  1,198
Maintenance CAPEX, $m
  -19
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
New CAPEX, $m
  -12
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
Cash from investing activities, $m
  -31
  -34
  -35
  -37
  -39
  -41
  -44
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -79
  -83
  -87
  -92
  -97
  -101
  -106
  -112
  -117
  -123
  -129
  -135
Free cash flow, $m
  190
  204
  219
  236
  253
  270
  289
  308
  328
  349
  366
  389
  413
  439
  465
  493
  522
  553
  585
  618
  654
  691
  730
  771
  813
  858
  906
  956
  1,008
  1,063
Issuance/(repayment) of debt, $m
  65
  68
  71
  74
  77
  80
  83
  87
  91
  95
  99
  104
  108
  113
  119
  124
  130
  136
  143
  150
  157
  164
  172
  181
  190
  199
  209
  219
  230
  241
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  65
  68
  71
  74
  77
  80
  83
  87
  91
  95
  99
  104
  108
  113
  119
  124
  130
  136
  143
  150
  157
  164
  172
  181
  190
  199
  209
  219
  230
  241
Total cash flow (excl. dividends), $m
  255
  272
  290
  309
  329
  350
  372
  395
  419
  444
  465
  493
  522
  552
  584
  617
  652
  689
  728
  768
  811
  855
  902
  951
  1,003
  1,057
  1,114
  1,174
  1,237
  1,303
Retained Cash Flow (-), $m
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  241
  257
  275
  293
  312
  333
  354
  376
  399
  423
  443
  470
  498
  527
  558
  590
  624
  659
  696
  735
  776
  819
  864
  912
  961
  1,014
  1,069
  1,126
  1,187
  1,251
Discount rate, %
  10.00
  10.50
  11.03
  11.58
  12.16
  12.76
  13.40
  14.07
  14.77
  15.51
  16.29
  17.10
  17.96
  18.86
  19.80
  20.79
  21.83
  22.92
  24.07
  25.27
  26.53
  27.86
  29.25
  30.72
  32.25
  33.86
  35.56
  37.33
  39.20
  41.16
PV of cash for distribution, $m
  219
  210
  201
  189
  176
  162
  147
  131
  116
  100
  84
  71
  58
  47
  37
  29
  22
  16
  12
  8
  6
  4
  2
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Pool Corporation is a distributor of swimming pool supplies, equipment and related leisure products. The Company is a distributor of irrigation and landscape products in the United States. As of December 31, 2016, the Company operated 344 sales centers in North America, Europe, South America and Australia, through its four distribution networks, including SCP Distributors (SCP), Superior Pool Products (Superior), Horizon Distributors (Horizon) and National Pool Tile (NPT). The Company's customers include swimming pool remodelers and builders; specialty retailers that sell swimming pool supplies; swimming pool repair and service businesses; irrigation construction and landscape maintenance contractors, and golf courses and other commercial customers. Its products include pool equipment and components for pool construction and the remodeling of existing pools, and irrigation and landscape products. Its products also include other pool construction and recreational products.

FINANCIAL RATIOS  of  Pool Corporation (POOL)

Valuation Ratios
P/E Ratio 51.6
Price to Sales 3
Price to Book 37.5
Price to Tangible Book
Price to Cash Flow 46.6
Price to Free Cash Flow 58.6
Growth Rates
Sales Growth Rate 8.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 17.2%
Cap. Spend. - 3 Yr. Gr. Rate 12.3%
Financial Strength
Quick Ratio 22
Current Ratio 0
LT Debt to Equity 213.2%
Total Debt to Equity 213.7%
Interest Coverage 31
Management Effectiveness
Return On Assets 16%
Ret/ On Assets - 3 Yr. Avg. 14.6%
Return On Total Capital 24.3%
Ret/ On T. Cap. - 3 Yr. Avg. 22.3%
Return On Equity 64.6%
Return On Equity - 3 Yr. Avg. 52.6%
Asset Turnover 2.7
Profitability Ratios
Gross Margin 28.8%
Gross Margin - 3 Yr. Avg. 28.7%
EBITDA Margin 10.5%
EBITDA Margin - 3 Yr. Avg. 9.8%
Operating Margin 10%
Oper. Margin - 3 Yr. Avg. 9.2%
Pre-Tax Margin 9.4%
Pre-Tax Margin - 3 Yr. Avg. 8.7%
Net Profit Margin 5.8%
Net Profit Margin - 3 Yr. Avg. 5.4%
Effective Tax Rate 38.6%
Eff/ Tax Rate - 3 Yr. Avg. 38.6%
Payout Ratio 33.6%

POOL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the POOL stock intrinsic value calculation we used $2998 million for the last fiscal year's total revenue generated by Pool Corporation. The default revenue input number comes from 0001 income statement of Pool Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our POOL stock valuation model: a) initial revenue growth rate of 6.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 10%, whose default value for POOL is calculated based on our internal credit rating of Pool Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Pool Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of POOL stock the variable cost ratio is equal to 86%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $109 million in the base year in the intrinsic value calculation for POOL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Pool Corporation.

Corporate tax rate of 27% is the nominal tax rate for Pool Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the POOL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for POOL are equal to 6.8%.

Life of production assets of 10.9 years is the average useful life of capital assets used in Pool Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for POOL is equal to 20.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $223.59 million for Pool Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 39.368 million for Pool Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Pool Corporation at the current share price and the inputted number of shares is $7.4 billion.

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