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Pool Corp. Message Board

  • ssam ssam Oct 16, 2006 1:41 AM Flag

    Friday's announcement signals buy

    The Friday announcement of earning release is a good indication of buying. I have had POOL for years and it seems always the case when the day they announce the earning release stock will go up or down with somewhat bigger percentage change against the market. It is always a good indication on where the POOL's price will head to for the next 30 days or quarter. Last Friday the price went up again. I will keep it as a buying signal. Don't blame me on how silly it sounds like, but it works.

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    • I try my best to be neither a rah-rah merchant nor a doom-and-gloom salesman for any stock - I try my best to evaluate impartially.

      I have learned to cast a jaundiced eye on earnings reports, analysts recommendations, and economic headlines - there is simply too much spin these days to take any of it seriously.
      The only thing that makes sense is do your own research and make your own conclusions - then you have no one to blame but yourself if things go wrong.

      Case in point: The headlines reported a 5.9% increase in new home starts last month. But if you take time to read the report, you find in the footnotes that the error range is + or - 8%, meaning that the 5.9 number is totally meaningless. New home starts could have been 13.9% or -2.1%, and the latter is probably closer to the truth when you look at other data.

      Same holds true with earnings reports - you have to try to look beyond the numbers to the quality of those earnings, because it is guaranteed that the researchers in the institutions make their own determinations of earnings - and it is big money that moves stocks up and down.

      My personal view is that although the company reported earnings as expected, the quality of those earnings is suspect, and therefore there will not be a big upward push in the price per share - most likely a sideways action until more is revealed in the next quarter.

    • There seems to my non-professional eye more than a couple of red flag issues. 2005 showed an increase in base business of 13%, while the latest quarter only showed a 9% increase and the 3rd quarter is typically the strongest quarter.

      The type of inventory accounting method is important to the quality of earnings. If Pool uses FIFO, the amount of cost reduction was misleading and contributed to the per share earnings. (FIFO reduces costs by current inventory price and not actual cost of inventory - if the price of inventory rises, there is an accrual cost reduction that makes profits look better than they are truly.)

      In the note on earnings, the company stated a significant part of the increase was due to acquisitions - this growth seems unlikely to be sustainable.

      And AR and inventories are problematic.

      With these types of warnings, it would seem prudent to stay on the sidelines and wait until the business climate was better before loading up with Pool stock.

    • So what happened? I thought this stock was going to skyrocket.

      Looks like another quarter of trading between 36 to 41.

      • 2 Replies to poolmanbiz
      • A few caution lights are blinking in this last quarterly report. It is not earnings but quality of earnings that matters. Pool, correctly under GAAP, counts revenue upon shipment - but real cash isn't returned until the product is sold by the retail outlets. YOY receivables grew 58%, or an additional $22,000,000 in counted but uncollected revenue. An indication of slowdown. It also appears that a substantial part of the increase in sales was due to acquisitions - something that is difficult to repeat. Expansion outside the base business usually typifies that the base business has peaked and only moderate growth can be expected.

        It appears that Pool's long run of growth has neared its end and that will be reflected in the price - I don't think it much matters whether you buy or sell at this point as I would expect the stock to be range bound between 32-42 for the foreseeable future.

 
POOL
68.08-1.10(-1.59%)Apr 17 4:00 PMEDT