Tuesday, Truist Securities maintained a Buy rating on Latham Group Inc. shares (NASDAQ:SWIM), despite revising its estimates for the company. The revision follows industry leader POOL's recent announcement of reduced expectations for new pool construction and renovation.
The firm acknowledged the challenges facing the pool industry, noting its tendency to underperform other consumer discretionary categories due to the high cost of pool products and services. The high ticket price is seen as a significant factor, especially in the context of the broader economic environment.
In spite of these industry-wide headwinds, Truist Securities highlighted that Latham Group Inc. continues to meet its financial obligations. The firm pointed out that the company's current low share price positions it in such a way that any positive company-specific developments could have a substantial impact on its stock value.
The analyst from Truist Securities emphasized the potential for significant share movement for SWIM, stating, "Regardless, SWIM is still meeting its financial obligations and given its low share price, any company-specific positive data point could meaningfully move the shares."
This statement underscores the firm's view that while the pool industry may face slowdowns, Latham Group Inc. is still a viable investment option, particularly if the company can deliver positive news that stands out against the backdrop of the industry's reduced expectations.
In other recent news, Latham Group has reported a resilient Q1 performance, surpassing their own forecasts despite a softer market for the pool industry. The company's Q1 results showed an increase in gross margins and a reduction in net loss, despite a 19.7% year-over-year decline in net sales to $110.6 million. The net loss narrowed to $7.9 million, marking an improvement from the previous year.
Latham Group's strategic cost reductions and efficiency improvements have led to a stronger margin profile. The company continues to prioritize investment in growth initiatives such as sales, marketing, and R&D. With a solid cash position of $43.8 million, Latham Group is well-positioned to navigate the uncertain economic landscape.
Despite the projected 15% decline in new pool starts, Latham Group remains optimistic about potential market share gains with the rollout of their Measure tool for covers and liners. The company anticipates consistent capital expenditures throughout 2024, prepared to deploy capital for growth as market conditions improve. These are among the recent developments for Latham Group.
InvestingPro Insights
Following Truist Securities' maintained Buy rating on Latham Group Inc. (NASDAQ:SWIM), InvestingPro data paints a detailed financial picture of the company. With a market capitalization of $410.28 million and a high P/E ratio of 98.61, investors are valuing the company significantly for its future earnings potential.
Despite the industry's challenges, Latham Group's stock has seen a large price uptick of 30.04% over the last six months, and the year-to-date return is even more impressive at 34.98%, indicating a strong recent performance in the market. Moreover, the company's liquid assets surpass short-term obligations, which is a positive sign of financial health.
InvestingPro Tips suggest that while the company is trading at a high earnings multiple, it is also trading at a low P/E ratio relative to near-term earnings growth, which could be an indicator of potential value for investors. Moreover, it is worth noting that the company does not pay a dividend, focusing instead on reinvesting earnings back into the business. For those interested in a deeper analysis, there are 11 additional InvestingPro Tips available, which can be accessed with a subscription. Interested readers can use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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