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Why Tempur-Pedic Got Put to Sleep in 2012

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The year is nearing its end, and now's a good opportunity to look at what happened throughout 2012 to the stocks you follow. If you know the important things that a company achieved, as well as any challenges it failed to overcome, then you can make a better decision about whether it really deserves a spot in your portfolio.

Today, I'll look at Tempur-Pedic (NYSE: TPX  ) . As a premium mattress maker, Tempur-Pedic relies on a solid economy to support sales. Yet even though the economic recovery slowly improved throughout the year, the gains didn't come fast enough for Tempur-Pedic, which suffered a big plunge early in the year. Read on to find out more about what moved shares of Tempur-Pedic this year.

Stats on Tempur-Pedic

Year-to-date stock return


Market cap

$1.83 billion

Revenue, past 12 months

$1.43 billion

Net Income, past 12 months

$140 million

1-year revenue growth


1-year net income growth


CAPS rating (out of 5)


Source: S&P Capital IQ.

Can Tempur-Pedic finally wake up?
Tempur-Pedic has had problems throughout 2012. In early June, the stock lost about half its value when it said that its full-year earnings would come in almost a third below where analysts had expected, with a corresponding revenue shortfall as well. Then in October, the stock lost nearly a quarter of its value when it cut its 2012 guidance again. International sales have been somewhat of a bright spot at various points during the year, but slow North American sales have definitely held Tempur-Pedic back.

The problems weren't unique to Tempur-Pedic, though. Once-hot 2011 IPO Mattress Firm (NASDAQ: MFRM  ) has given investors similarly sleepless nights, having lost half its value since its April highs as sales throughout the industry have been disappointing. Select Comfort (NASDAQ: SCSS  ) has held up somewhat better, although even it has given investors some concerns about future guidance.

Tempur-Pedic has taken advantage of low prices throughout the industry to make some strategic moves. In September, Tempur-Pedic announced that it would buy Sealy (UNKNOWN: ZZ.DL  ) for $242 million in cash. Including assumption of debt, the total deal price tag rose to about $1.3 billion.

Tempur-Pedic sports a relatively cheap valuation at 11 times forward earnings. For the company to make investors comfortable again, Tempur-Pedic will need to demonstrate it can get back into growth mode as an economic recovery takes firmer hold over the nation.

Find a better stock
If you want a better performer than Tempur-Pedic, we've got a great prospect for you to check out. The Motley Fool's chief investment officer has just selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Click here to add Tempur-Pedic to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

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Related Tickers

10/25/2016 4:02 PM
TPX $51.45 Down -0.66 -1.27%
Tempur Sealy Inter… CAPS Rating: ****
MFRM $0.00 Down +0.00 +0.00%
Mattress Firm Hold… CAPS Rating: *
SCSS $19.51 Up +0.16 +0.83%
Select Comfort CAPS Rating: *****
ZZ.DL $0.00 Down +0.00 +0.00%
Sealy Corporation CAPS Rating: No stars