Is Pool Corp (POOL) a Buy in 2026 Amid Sluggish Demand and Margin Pressures?

The pool and outdoor living sector has faced significant headwinds in 2025, with rising interest rates, inflationary pressures, and shifting consumer priorities dampening demand for discretionary products like new pool construction and remodeling according to Pool Corp's 2024 results. For Pool Corporation (POOL), a dominant player in this space, the challenge lies in navigating these macroeconomic headwinds while leveraging its resilient maintenance product segment and strategic initiatives to drive long-term value. As investors weigh the case for POOL in 2026, a value investing lens reveals a complex picture of margin pressures, operational discipline, and cautious optimism.

Financial Performance: A Tale of Two Segments

Pool Corp's 2024 results underscored the divergent performance of its business lines. Full-year net sales declined 4% to $5.3 billion, driven by weaker demand for discretionary products according to the company's financial report. However, maintenance and repair sales-less-sensitive to economic cycles-remained stable, contributing to a modest 10-basis-point improvement in gross margin to 29.7% for the year. This resilience highlights the company's ability to pivot toward recurring revenue streams, a critical advantage in a volatile market.

In 2025, the trend continued. Q3 2025 net sales rose 1% to $1.5 billion, with gross margin expanding to 29.6% due to mid-season price increases and supply chain optimizations. Despite this, operating income for the first nine months of 2025 declined 5% to $528.2 million, reflecting higher operating expenses and inflationary pressures. The company's full-year 2025 earnings guidance-$10.80 to $11.30 per diluted share-was revised downward from earlier estimates, signaling ongoing challenges in discretionary markets.

Strategic Initiatives: Digital Transformation and Market Expansion

Pool Corp's long-term value proposition hinges on its ability to adapt to structural shifts in consumer behavior and industry dynamics. The company has prioritized digital transformation, with its POOL360 platform now accounting for 16% of total sales according to Q2 2025 earnings slides. This digital ecosystem not only enhances customer engagement but also reduces reliance on traditional, labor-intensive sales channels. Additionally, the company expanded its sales center network to 454 locations by Q3 2025, a 4% increase year-over-year, broadening its geographic footprint and customer reach.

Strategic acquisitions also remain a cornerstone of growth. Pool Corp added two new acquisitions in 2024 and plans to allocate $25–$50 million for further expansion in 2025 according to market analysis. These moves aim to consolidate market share in fragmented segments and diversify revenue streams. CEO Peter D. Arvan emphasized the importance of disciplined capital allocation, with a $253 million return to shareholders via dividends and buybacks in Q2 2025.

Valuation and Risk Considerations

From a valuation perspective, Pool Corp appears attractively priced relative to its peers. A discounted cash flow (DCF) analysis suggests the stock is undervalued by 19.7%, with projected free cash flows reaching $626 million by 2035. The company's forward price-to-earnings (PE) ratio of 22.1x is higher than the industry average of 17.9x but remains below the peer group average of 34.9x according to financial analysis, indicating a balanced risk-reward profile.

However, risks persist. The company's operating margin contracted 190 basis points to 11.6% in 2024 according to the year-end report, and cash flow from operations turned negative in the first half of 2025 according to Q2 results, raising concerns about liquidity. While Pool Corp's strong balance sheet- with $659.2 million in operating cash flows in 2024 -provides a buffer, rising debt levels and margin pressures could constrain flexibility in a prolonged downturn.

Conclusion: A Cautious Buy for Patient Investors

Pool Corp's long-term fundamentals remain intact, with a dominant market position, recurring revenue streams, and a track record of disciplined capital allocation. The company's focus on digital transformation and maintenance products positions it to weather macroeconomic volatility, while strategic acquisitions offer growth potential. However, near-term margin pressures and a challenging discretionary market necessitate caution.

For value investors with a multi-year horizon, POOL presents an intriguing opportunity. The stock's current valuation, combined with its resilient business model and strategic adaptability, suggests that the company is likely to outperform in a recovery scenario. That said, investors should monitor key metrics such as gross margin trends, debt levels, and the pace of digital adoption to ensure the company remains on track to deliver sustainable returns.