StockStory Questions Latham’s Growth Despite Better Capital Returns

StockStory said it is passing on Latham Group (SWIM), citing trailing-12-month sales of $576.6 million that were close to revenue five years earlier. The publisher said that record raised concerns about the company’s long-term growth.

At the article’s cited price of $6.14, Latham had gained 18.8% over six months, compared with a 21.1% rise for the S&P 500. As of 15:12 UTC on Sept. 30, the shares traded at $6.25, up 1.79% from the previous close.

StockStory also pointed to analyst consensus estimates that Latham’s free cash flow margin will fall to 3.7% over the next year, from 6.4% in the trailing 12 months. Free cash flow is the cash a company has left after spending on its business.

The analysis cited a positive counterpoint: Latham’s return on invested capital, or ROIC, rose by an average of 3.7 percentage points a year over the last few years. ROIC compares operating profit with the capital a company has raised.

StockStory said Latham’s shares were valued at 24.1 times forward earnings at the article’s cited price. It suggested considering a business it described as a favorite of Charlie Munger, but did not name that company in the article.