Why Select Comfort Shares Got Crushed

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  ) were getting crushed today, falling as much as 20% after missing earnings estimates and providing downbeat guidance in its quarterly report.

So what: The maker of the Sleep Number bed delivered profits of just $0.22 per share, well below the $0.32 Wall Street had expected, and down from $0.27 a year ago. Sales increased 17% during the quarter, but management blamed a slowdown in sales during the last two weeks of the period and increased marketing and R&D expenses for the drop in net income. Same-stores improved by a robust 11%, but 2013 EPS guidance of $1.65-$1.80 was below analyst projections of $1.89.

Now what: Select Comfort's miss looks especially stark next to Tempur-Pedic, which jumped 8% today after beating estimates. Shares of Select Comfort have taken a hit over the last few months, but it looks as if the damage is done. Its current valuation looks very reasonable based on the revised 2013 guidance, and its strong same-store sales indicate that there's more growth left in the brand. I'd see shares bottoming out at this point.

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