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Last update on 2024-06-06

Pool (POOL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Analyze Pool Corporation's Piotroski F-Score in 2023, with a final score of 5/9, focusing on financial health indicators such as net income, cash flow, and leverage.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 5

We're running Pool (POOL) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

The Pool Corporation (POOL) was evaluated using the Piotroski F-Score, which ranges from 0 to 9 and measures a company's financial position based on profitability, liquidity, and efficiency criteria. POOL scored 5 out of 9. Positive indicators include a positive net income ($523,229,000) and cash flow from operations ($888.229 million) in 2023, both showing consistent growth over two decades. Additionally, the company has reduced leverage and the number of outstanding shares. However, the Return on Assets (ROA) and Current Ratio have declined, as have the gross margin and asset turnover ratios, indicating some areas of concern.

Insights for Value Investors Seeking Stable Income

Pool Corporation has areas of strength, particularly in profitability and reduced financial risk, highlighting its potential long-term stability. However, some concerns regarding efficiency and short-term liquidity should not be overlooked. Overall, with half of the Piotroski criteria met, it might be worth further investigating POOL, especially if long-term reliability and reduced debt appeal to you. Nevertheless, consider monitoring those weaker areas closely.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Pool (POOL)

Company has a positive net income?

Net income is the total profit of a company after taxes and expenses. It's a key indicator of a company's profitability and financial health.

Historical Net Income of Pool (POOL)

For 2023, the net income of Pool (POOL) stands at $523,229,000, which is positive. This translates to adding 1 point for this criterion. When comparing this to historical performance, over the last 20 years, the company has consistently reported a positive net income every year. The lowest was in 2009 at $19,202,000 and the highest was in 2021 at $748,462,000. This consistent ability to generate profit reinforces the financial stability and operational efficiency of Pool.

Company has a positive cash flow?

Cash Flow from Operations (CFO) evaluates the cash inflow from core operational activities. It indicates a company's capacity to generate sufficient cash from regular business operations, which is vital for sustaining and expanding operations without relying on external financing.

Historical Operating Cash Flow of Pool (POOL)

The Cash Flow from Operations for Pool (POOL) in 2023 stands at $888.229 million, which is positively remarkable as it is the highest on record over the past two decades. This consistent improvement highlights POOL's increasing efficiency in generating cash through its primary business activities. In historical context, it's a significant progression from $78.134 million back in 2003. This positive and increasing trend signifies healthy operational performance, adding a solid 1 point under the Piotroski criterion.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures a company's efficiency in generating profit from its assets. An increase in ROA indicates better utilization of assets.

Historical change in Return on Assets (ROA) of Pool (POOL)

In comparing Pool's (POOL) ROA of 0.1496 in 2023 to 0.2203 in 2022, it is clear that the ROA has decreased. Therefore, according to the Piotroski Analysis criteria, we set this to 0 points. Evaluating the trend further with additional data, POOL's ROA in the last 20 years shows both increases and decreases. For instance, in 2021, during the height of the COVID-19 pandemic, POOL excelled with an operating cash flow of 313,490,000. This resulted in a considerable ROA. Despite the fluctuations, consistent growth can be observed, although it may lag behind the industry median, ending notably lower in recent years.

Operating Cashflow are higher than Netincome?

Cash flow from operations is a key metric for evaluating the quality of a company's earnings. It's important to see operating cash flow higher than net income, as it indicates a strong capacity for generating cash from core business activities.

Historical accruals of Pool (POOL)

For 2023, Pool (POOL) reported an operating cash flow of $888,229,000 compared to a net income of $523,229,000. This results in the operating cash flow being higher than net income, thus adding 1 point in the Piotroski score. Over the past 20 years, the company's operating cash flow has shown a generally positive growth trend, highlighting a significant increase from $78,134,000 in 2003 to $888,229,000 in 2023. Comparatively, net income has also grown from $50,848,000 in 2003 to $523,229,000 in 2023. This divergence between the two metrics indicates an improvement in cash generation capability, suggesting that earnings quality and intrinsic business strength have been high. Notably, accruing substantially positive cash flows relative to net income reflects efficient financial management and robust business performance.

Liquidity of Pool (POOL)

Leverage is declining?

Change in Leverage measures the change in a company's financial structure by comparing their debt levels from one period to another. Lower leverage generally indicates less financial risk.

Historical leverage of Pool (POOL)

In analyzing Pool Corporation for 2023, we observe a leverage ratio of 0.3609, down from 0.4376 in 2022. This decrease in leverage is a positive trend, adding one point to the Piotroski score for Pool Corporation. A historical glance at the leverage over the past 20 years reveals fluctuations. For example, leverage peaked at 0.5299 in 2018 and hit a low of 0.008 in 2003, painting a broad picture of Pool's financial decisions and risk management strategies. The decline in leverage in 2023 indicates that Pool is becoming less reliant on debt, thus reducing financial risk and improving its overall financial health.

Current Ratio is growing?

The Current Ratio is a financial metric that measures a company's ability to pay off its short-term liabilities with its short-term assets. It is important because it provides insight into the liquidity position of the company.

Historical Current Ratio of Pool (POOL)

Comparing the Current Ratio of 2.3553 in 2023 with 2.9879 in 2022 for Pool Corporation (POOL), we observe a decrease rather than an increase in the Current Ratio. This suggests that the company's short-term liquidity position has weakened in 2023 relative to 2022. According to the last 20 years of data, the Current Ratio shows some volatility but generally stays above the industry median, which was 1.493 for 2023. For adding points, since the ratio decreased in 2023, we set it to 0.

Number of shares not diluted?

Examining the change in shares outstanding helps understand stock dilution, which impacts shareholder value.

Historical outstanding shares of Pool (POOL)

For Pool Corporation (POOL), the number of outstanding shares decreased from 39,409,000 in 2022 to 38,704,000 in 2023. This represents a reduction in shares outstanding, which generally indicates a positive trend for existing shareholders as it suggests the company might be buying back shares, aiming to improve earnings per share (EPS). Over the past 20 years, Pool Corporation's outstanding shares have been decreasing consistently, from 55,773,000 shares in 2003 to 38,704,000 in 2023. This trend of reducing outstanding shares is favorable for shareholders, and this criterion earns a score of 1.

Operating of Pool (POOL)

Cross Margin is growing?

Change in Gross Margin evaluates whether a company is improving its production efficiency. An increase in gross margin can signal better cost management or higher pricing power.

Historical gross margin of Pool (POOL)

Comparing Pool's gross margin in 2023 (0.2996) with 2022 (0.3129), it is evident that the gross margin has decreased in 2023. This is a negative trend as the company’s efficiency in managing production costs has declined. The additional data shows fluctuating gross margins for Pool Inc., indicating variable efficiency over the years. The industry median being significantly higher at 0.4657 in 2023 highlights that Pool Inc. is behind many of its peers in managing production costs.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales. High asset turnover means higher efficiency.

Historical asset turnover ratio of Pool (POOL)

Comparing the asset turnover ratios, Pool Corporation (POOL) shows a decrease from 1.8188 in 2022 to 1.5848 in 2023. This decline indicates a lower efficiency in using assets to generate revenue. Historically, POOL has had higher asset turnover ratios, peaking at 2.8156 in 2004. The consistent decline over the past two decades could be a cause for concern. Thus, this criterion adds 0 points to the Piotroski score for 2023, highlighting an area where efficiency might be improved.


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