# Pool Corporation (POOL) — Financial Analysis

**Exchange:** NASDAQ  
**Coverage as of:** 2026-Q2  
**Updated:** 2026-05-27  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/POOL/thesis · /stocks/POOL/memo

## Financial Snapshot

---
source: coverage-next-full
ticker: POOL
company: Pool Corporation
step: 04
title: Financial Quality & Adversarial Research Sweep
created: 2026-05-27
---

### Step 04 — Financial Quality & Adversarial Research Sweep: Pool Corporation (POOL)

#### Key Findings
**Net signal: High-quality financials, no material adversarial flags.** Pool Corporation's financial statements are clean: revenue is straightforwardly recognized on product sales, cash flow conversion is high, and there are no material restatements, related-party issues, or regulatory investigations in the record. The Adversarial Research Sweep finds no short seller reports, no fraud allegations, no regulatory investigations, and no material litigation. The primary financial quality concern is the elevated inventory position relative to revenues and working capital dynamics during the slowdown.

#### Implications for Thesis and Valuation
- High accounting quality supports face-value reading of reported financials — no need for material adjustments
- FCF conversion to net income has historically been excellent (FY2023: $828M FCF vs. $523M net income = 158% conversion), supporting the quality of earnings
- FY2025 FCF ($310M) was notably below net income ($406M) due to working capital build (inventory +13%) — this is a one-time headwind, not an earnings quality issue
- Capital allocation has been consistently shareholder-friendly but arguably too aggressive during a cyclical downturn (combined dividends + buybacks of $531M in FY2025 vs. $310M FCF = net cash outflow, funded by debt increase from $950M to $1.2B)

#### Objective
Assess financial statement quality, accounting conservatism, FCF conversion, and conduct the mandatory Adversarial Research Sweep.

#### Narrative Analysis

##### Financial Statement Quality Assessment

**Revenue Recognition:** Pool Corp recognizes revenue on product sales when control transfers to the customer — typically at the point of delivery or customer pickup [S1]. As a distributor, revenue recognition is straightforward: no multi-element arrangements, no subscription-style deferred revenue, no complex licensing. Revenue is clean.

**Inventory:** Inventory is the largest balance sheet item at $1.5B (FY2025). Pool Corp uses average cost method. Inventory has fluctuated with the cycle: peaked at $1.6B (FY2022 — deliberate build ahead of supply-chain disruption), normalized to $1.3B (FY2024), then built back to $1.5B in FY2025 (seasonal + tariff pre-buy) [S2]. Inventory turns have slowed as volumes declined — a concern but not a signal of fraudulent inflation. Days Inventory Outstanding (DIO) has risen from ~114 days (FY2022) to ~143 days (FY2025 estimate). This is a working capital efficiency headwind but not an accounting issue.

**Goodwill:** $707M on $3.6B total assets (19.5%) — modest relative to many distribution comps. The FY2021 Porpoise acquisition ($812M) drives most goodwill. No impairment charges have been taken [S2]. Annual impairment testing has passed each year, consistent with the installed base durability of the pool distribution business.

**Accruals & Cash Flow Conversion:** The acid test of earnings quality — does operating cash flow track reported net income?

| Year | Net Income ($M) | OCF ($M) | FCF ($M) | FCF/NI Ratio |
|------|---------------|---------|---------|-------------|
| FY2022 | 748 | 485 | 441 | 59% |
| FY2023 | 523 | 888 | 828 | 158% |
| FY2024 | 434 | 659 | 600 | 138% |
| FY2025 | 406 | 366 | 310 | 76% |

FY2023 and FY2024 show exceptional FCF conversion — driven by working capital release as inventory was drawn down from FY2022 peak. FY2025's lower FCF/NI ratio reflects a deliberate inventory rebuild (tariff pre-buy and seasonal positioning) and is a transitory factor, not an earnings quality concern [S3].

**Debt:** Total debt increased from $950M (FY2024) to $1.2B (FY2025) — a $250M increase. This was driven primarily by: (1) funding $531M of capital returns (dividends + buybacks) against only $310M FCF, and (2) the inventory build. Net debt to EBITDA is approximately 1.7x (FY2025, $1.1B net debt / $654M EBITDA) — moderate for a stable distribution business but worth monitoring given the earnings downturn [S2].

**Depreciation & Amortization:** ~$51-73M annually (EBITDA - EBIT spread). Modest relative to capital-light distribution model. CapEx consistently $38-60M — below D&A in most years, suggesting asset base is not deteriorating [S2].

##### Adversarial Research Sweep

**Short Seller Reports:** No public short seller reports found on Pool Corporation [S4]. The company has maintained a strong institutional investor base (Berkshire Hathaway is a holder) and no activist/short campaigns are evident.

**Accounting Investigations/Restatements:** No SEC accounting investigations or formal restatements found in SEC filings or news search [S4].

**Regulatory Issues:** Pool Corporation is subject to standard environmental regulations (as a distributor of chemicals) and typical labor law. No material regulatory enforcement actions or investigations found [S4].

**Litigation:** Standard commercial litigation typical of a large distribution company. No material disclosed litigation that would represent a ≥10% EV risk [S4].

**Related-Party Transactions:** No material related-party transactions disclosed in proxy filings. Standard arms-length compensation structure [S1].

**Channel Stuffing/Revenue Quality:** Not applicable to a distribution model where revenue is recognized on delivery of physical product. No multi-year contracts, upfront revenue, or subscription models that could be manipulated [S1].

**Executive Departure:** CEO Peter Arvan departed May 4, 2026 — described as mutual agreement with no operational disagreement. This is the one reputational flag worth tracking: a CEO departure at a stock-price trough can signal frustration with a situation or boardroom disagreement not disclosed publicly. However, the new CEO (Watwood) was recruited in January 2026, suggesting planned succession. 2026 guidance was reaffirmed [S5].

**Conclusion:** Pool Corporation's financial statements are high quality. No material adversarial flags. The primary concerns are: (1) capital allocation aggressiveness relative to FCF (spending more on buybacks/dividends than FCF generates, funded by debt), and (2) working capital efficiency deterioration as the cycle turns — both cyclical, not structural.

#### Assumption Register Updates

| ID | Assumption | Type | Value | Basis | Sensitivity |
|----|-----------|------|-------|-------|------------|
| A20 | FCF/NI ratio normalized = 90-100% | Estimate | 90-100% | Historical non-WC-swing years | Medium |
| A21 | Net debt/EBITDA (FY2025) ~1.7x | Estimate | 1.7x | $1.1B net debt / $654M EBITDA | Medium |
| A22 | DIO increased to ~143 days | Estimate | ~143 days | ($1,455M / $3,717M COGS) × 365 | Medium |

#### Tables and Calculations

##### FCF Quality Analysis

| Year | Revenue ($M) | Net Income ($M) | OCF ($M) | FCF ($M) | FCF/NI | FCF/Revenue |
|------|-------------|---------------|---------|---------|--------|------------|
| FY2021 | 5,296 | 651 | 313 | 276 | 42% | 5.2% |
| FY2022 | 6,180 | 748 | 485 | 441 | 59% | 7.1% |
| FY2023 | 5,542 | 523 | 888 | 828 | 158% | 14.9% |
| FY2024 | 5,311 | 434 | 659 | 600 | 138% | 11.3% |
| FY2025 | 5,289 | 406 | 366 | 310 | 76% | 5.9% |

##### Working Capital Efficiency

| Year | Inventory ($M) | DIO (days est.) | A/R ($M) | DSO (days est.) |
|------|---------------|----------------|---------|----------------|
| FY2022 | 1,591 | 137 | 351 | 21 |
| FY2023 | 1,365 | 128 | 343 | 23 |
| FY2024 | 1,289 | 126 | 315 | 22 |
| FY2025 | 1,455 | 143 | 348 | 24 |

*DIO = Inventory / COGS × 365; DSO = A/R / Revenue × 365. FY2025 DIO rise is the key working capital concern.*

##### Debt & Leverage

| Year | Total Debt ($M) | Cash ($M) | Net Debt ($M) | EBITDA ($M) | Net Debt/EBITDA |
|------|---------------|---------|--------------|-----------|----------------|
| FY2022 | 1,387 | 46 | 1,341 | 1,065 | 1.3x |
| FY2023 | 1,364 | 67 | 1,297 | 787 | 1.6x |
| FY2024 | 1,272 | 78 | 1,194 | 663 | 1.8x |
| FY2025 | 1,535 | 105 | 1,430 | 654 | 2.2x |

*Note: StockAnalysis debt figures include operating lease liabilities. XBRL shows $1.199B combined debt (ex-leases) for FY2025. Net debt/EBITDA on this basis = $1.094B / $654M = 1.7x — manageable.*

##### Capital Allocation Summary (FY2025)

| Use of Cash | Amount ($M) | Notes |
|------------|-------------|-------|
| Operating Cash Flow | 366 | Includes WC headwinds |
| Less: CapEx | (56) | Maintenance + growth |
| = Free Cash Flow | 310 | |
| Less: Dividends | (185) | $4.95/share |
| Less: Buybacks | (346) | 60% premium to FCF |
| Total Capital Returned | (531) | 172% of FCF |
| Net Cash Surplus/(Deficit) | (221) | Funded by $250M debt increase |

##### Adversarial Research Sweep Summary

| Category | Finding | Severity | Action |
|----------|---------|---------|--------|
| Short seller reports | None found | None | No action |
| SEC investigations | None found | None | No action |
| Accounting restatements | None found | None | No action |
| Material litigation | None material | Low | Monitor |
| Related-party transactions | None material | None | No action |
| Channel stuffing / revenue quality | N/A (distribution) | None | No action |
| CEO departure (May 2026) | Flagged | Low-Medium | Monitor 2026 strategy |

#### Open Questions and Data Gaps
1. Composition of total debt (revolving credit vs. term loans vs. notes) and maturity schedule — relevant for refinancing risk assessment
2. Precise gross margin differential between product categories — if chemicals carry different margins than equipment, mix shifts during cycle affect analysis
3. Whether FY2025 inventory build is purely tactical (tariff pre-buy) or signals slowing demand absorption

#### Source Index

| Source Tag | Document | Section | Date | Notes |
|------------|----------|---------|------|-------|
| [S1] | Pool Corp 10-K (FY2024/2025) | Revenue recognition, related parties | 2025/2026 | Standard distributor accounting |
| [S2] | StockAnalysis.com / XBRL | Balance sheet history | 2026-05-27 | Inventory, goodwill, debt |
| [S3] | Pool Corp FY2025 Annual Results | Cash flow discussion | 2026-02-19 | OCF commentary; inventory build noted |
| [S4] | Web search — short seller, regulatory, litigation | Adversarial sweep | 2026-05-27 | No material flags found |
| [S5] | SEC 8-K 2026-05-04 | CEO transition | 2026-05-04 | Watwood/Arvan details |

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/POOL/fundamental

## Navigation

- Overview: /stocks/POOL
- Financials (this page): /stocks/POOL/financials
- Thesis: /stocks/POOL/thesis
- Investment Memo: /stocks/POOL/memo
- Coverage universe: /stocks