What happened

Shares of Tempur Sealy International (NYSE:TPX) have been giving investors a good night's sleep this year as the stock is up 84% so far in 2019, according to data from S&P Global Market Intelligence. The mattress maker has benefited from a pair of strong earnings reports, an improved relationship with Mattress Firm, and the introduction of its new cooling mattress. The company also took advantage of low expectations following a disappointing 2018.

As you can see from the chart below, the stock has gained steadily through 2019.

TPX Chart

TPX data by YCharts.

So what

Tempur Sealy came into 2019 looking like a value stock after losing 34% in 2018, a rough year for the mattress industry as Mattress Firm, the largest mattress retailer in the country, filed for bankruptcy in October. The news seemed to reflect the fact that the sector has too many stores and is suffering from online competition from the likes of Casper and others.

An elderly couple relaxes on a Tempur-Pedic bed.

A Tempur-Pedic bed. Image source: Tempur Sealy.

However, the stock kicked off 2019 on an upswing, riding higher with the market recovery at the beginning of the year. In late January, the company unveiled a number of products at an industry show, including the Tempur-breeze, which features a technology to keep the mattress three to eight degrees cooler at night. 

In February, the stock started to climb following a fourth-quarter earnings report that included 36% growth in Tempur-Pedic mattress unit sales in North America, a sign that its innovations are paying off. Overall sales increased 7.1% to $676.1 million, and adjusted earnings per share rose modestly from $0.87 to $0.90. In its guidance, the company called for adjusted EBITDA growth of 0% to 12% for 2019.

In April, the stock got another boost when Mattress Firm CEO Steve Stagner resigned, a positive move that would lead to its carrying Tempur Sealy products later in the year. 

The stock popped 7.4% at the beginning of May after the company turned in a strong first-quarter earnings report. Tempur-Pedic sales rose 37% in North America, and direct sales jumped 38%. Overall revenue was up 8.4%, or 10.4% in constant currency, to $690.9 million, and adjusted EPS rose 17.4% to $0.54. Management also lifted the low end of its full-year adjusted EBITDA forecast from $425 million to $435 million.

Finally, in June, the company announced new supply relationships with retailers including Mattress Firm, Big Lots, and Beter Bed Holding that it said would add $75 million to $100 million in annual adjusted EBITDA beginning in 2020.

Now what 

Tempur Sealy's results and gains this year have certainly been encouraging as both direct sales and North American Tempur-Pedic sales are booming. But investors should be mindful that the company operates in a slow-growth industry and is facing competition from several online-only challengers. The stock has also historically had big swings up and down, so shares may be due for a breather after nearly doubling this year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.