Why Select Comfort Shares Compressed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of mattress-maker Select Comfort (Nasdaq: SCSS  ) dipped as much as 11% today, after a strong earnings report, but disappointing guidance.

So what: The sleep specialist said Q3 profits grew 52%, to $26.2 million, or 46 cents per share, well ahead of estimates of $0.41. The maker of the well-known Sleep Number beds grew same-store sales by 21% and continues to add stores at a strong pace, expecting to grow locations by nearly 5% in the fourth quarter alone. Revenue guidance for this fast grower tripped up analysts, however, as its full-year sales guidance was off Wall Street's view by about 5%.

Now what: We've seen this story play out many times before with growth stocks. Ironically, Select Comfort managed to raise EPS guidance above analyst predictions, but sales tend to be the key figure with high fliers like Select Comfort, whose shares have nearly doubled in the last year. Still, this reaction seems overdone. At a forward P/E of 16.3, this stock is approaching an average valuation, and 21% comps would make most retailers pale by comparison. With strong organic sales growth, and a number of new stores coming open soon, this could be the right time to jump into bed with Select Comfort.

Need a wake-up call on Select Comfort news? Just add the company to your Watchlist.

Add Select Comfort to My Watchlist.

Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2064982, ~/Articles/ArticleHandler.aspx, 9/23/2014 4:46:20 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement