Pool Corporation (POOL): This Swimming Pool Leader Is a Good Play in the Housing Recovery

Tile Shop Hldgs, Inc. (NASDAQ:TTS) has been growing quite fast, operating around 70 stores in 22 states in the U.S. Shoppers can examine 60 various bathroom and kitchens vignettes in its showrooms. In the past three years, Tile Shop Hldgs, Inc. (NASDAQ:TTS) has consistently grown its comparable store sales. In 2012, the same store sales growth was 7.1% and operating margin was 18.8%. Interestingly, Tile Shop has managed to significantly raise its store count from 14 to 68 in the past twelve years. In the next several years, it’s expected that the total number of stores could reach 130-140. Tile Shop is trading at nearly $29.70 per share, with a total market cap of around $1.52 billion. The market seems to value Tile Shop quite expensively, at nearly 44.3 times its forward earnings.

Giant home improvement retailer expects more future growth

The Home Depot, Inc. (NYSE:HD), one of the biggest global home improvement retailers, is operating around 2,256 stores in the U.S., Canada, and Mexico, with the total square footage of 235 million. In 2013, the company set the target of 2.8% for sales growth, with the comparable store sales growth of around 4%, leading to double-digit EPS growth of around 17%, or $3.52 per share. What makes investors interested is its commitment to maximize shareholders’ returns, including dividends and share buybacks. The Home Depot, Inc. (NYSE:HD) targeted the payout ratio of around 50%, with the ongoing efforts to increase dividend every year. In the full-year 2013, Home Depot expected to pay a $1.56 per-share dividend , much higher than the dividend payment of $1.16 per share in 2012. Home Depot intended to repurchase up to $6.5 billion worth of its shares, creating the potential share repurchase yield of 5.8% for the year at the current trading price. At $76.60 per share, Home Depot is worth nearly $111.9 billion. The market values Home Depot at nearly 18 times its forward earnings.

My Foolish take

All three of these stocks could benefit shareholders in a long run, along with the ongoing recovery of the overall U.S. housing market. Income investors might go for Home Depot with its juiciest dividend yield among the three at 2%. Personally, I like Pool and Tile Shop because of their leading market positions. Those two businesses are positioned well in the upcoming housing boom.

Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Home Depot and Tile Shop Holdings. The Motley Fool owns shares of Tile Shop Holdings. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article This Swimming Pool Leader Is a Good Play in the Housing Recovery originally appeared on Fool.com is written by Anh HOANG.

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