fstop123/E+ via Getty Images One of the more interesting companies, in terms of its business model, is a firm called Leslie’s ( LESL ). This enterprise focuses on servicing the pool and spa industry in the US. With a significant market share in its niche, and attractive revenue and cash flow growth in recent years, the company makes for an interesting prospect for long-term investors. But buying into a company of such quality does not come cheap. Although the business gets cheaper each year because of improving fundamentals, shares are now looking either fully valued or close to it. This is even factoring in forecasted growth for the 2022 fiscal year that management has provided. Diving into recent developments
The last time I wrote about Leslie’s was in an article published in October of 2021. In that article, I called the company an expensive prospect, but I made the claim that it still represented a fine opportunity nonetheless. I ultimately rated the business a bullish prospect in that article, relying heavily on management guidance for the business moving forward. Since the publication of that article, shares have performed quite well. Investors have seen a return, as of this writing, of 9.9%. That compares to the 6.3% achieved by the S&P 500 over the same period of time.
Before I go on, one thing I should discuss briefly is what the company ultimately does. Today, it operates as a direct-to-consumer brand in what it says is the $11 billion pool and spa care industry in the US. Over the past several decades, the company has grown its physical presence to include a network of 952 branded locations, plus a digital platform that consumers can shop on. This has allowed the enterprise to achieve a significant market share, estimated by management at 15% for the residential aftermarket product category, which is where it specializes. Author – SEC EDGAR Data Such a quality firm has required significant growth in order to get to the point that it is today. Between 2018 and 2020, for instance, the company grew rapidly, expanding from $892.60 million to $1.11 billion. Net profits over this time frame surged from $17.13 million to $58.56 million, while operating cash flow more than doubled from $43.28 million to $103.41 million. And EBITDA increased from $151.80 million to $182.77 million.
When I wrote about the company previously, I pointed out that shares were trading at rather lofty multiples. On a forward basis, the company was trading, using the 2021 figures, at a multiple of 24.8. This would drop to 21.1 if we relied on 2022 estimates offered by management. The price to operating cash flow multiple was 21.6, dropping to 16.7 on a forward basis. And the EV to EBITDA multiple was 16.6, eventually falling to 13.8 if we relied on the 2022 estimates. Author – SEC EDGAR Data On the whole, management ended up performing quite well for the 2021 fiscal year. That data, recently released, shows revenue climbing to $1.34 billion. That came as the company’s store count expanded to the 952 locations that it has today, up from the 936 that it had one year earlier. It also helped that comparable store sales expanded by 21.5% year over year. Net income came in at $126.6 million, thanks in large part to profits in the final quarter of the year totaling $44.5 million compared to the $42.6 million generated in the fourth quarter of 2020. Operating cash flow, meanwhile, came in at $169.6 million, driven by the final quarter’s reading of $50.7 million compared to the $17.5 million seen one year earlier. And EBITDA of $270.61 million was made possible thanks to the metric in the latest quarter climbing from $80.1 million to $82 million. Focusing on the future
Now that 2021 is over, management has come back to the drawing board when it comes to 2022 estimates. They currently anticipate sales of between $1.475 billion and $1.50 billion. At the midpoint, this would imply an increase of 10.8% year over year. Net income should be around $170 million to $180 million, while EBITDA should range between $295 million and $305 million. Management provided no guidance when it came to operating cash flow. But if we assume a similar year-over-year growth rate to what we should see with EBITDA, then a reading of around $180.90 million should be anticipated. Author – SEC EDGAR Data Although the company has fared well recently, and although the fundamental picture of the business continues to […]
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