Mattresses might not seem like the most exciting place to invest, but if you take a closer look at Purple Innovation (PRPL -6.66%), you might change your mind. In this Fool Live video clip, recorded on Sept. 30, contributor Jon Quast explains why Purple Innovations could have lots of room to grow in the years ahead. 

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Jon Quast: So, the first company that I'm going to talk about today is a company called Purple Innovation. This is a mattress company. Now, just as I'm getting set up here, remember that these are stocks on our radar. We're talking about companies that, at least in my case, I find interesting. It's something that I think that investors should know about. Not necessarily screaming buy, go out today and buy it, I'm just saying this is something that you want to know about. There we go.

Purple Innovation. These are companies under $10 billion market cap. Purple Innovation, symbol PRPL, market cap is only $1.5 billion right now. Excuse me just a second. Let me get to the next slide here. What does Purple Innovation do? Maybe I should start with saying, I like to invest in industries. I like to invest in markets that are growing. The mattress industry isn't necessarily one that screams, "this is the next big thing," this is a growing industry, because by units, the mattress industry isn't actually growing all that much. Under normal circumstances, that might keep me from buying a stock like Purple.

However, this is research by Prescient & Strategic Intelligence that shows that by 2030, the market for mattresses is actually expected to almost double. But this isn't revenue, keep in mind. What's happening here is units of mattresses aren't really increasing all that much, but there is a big shift going on from entry level mattresses to more premium brands. I find that interesting and that is the market that Purple plays in. Purple's research backs this up.

It shows here on their slide deck the mass premium and premium, maybe 23% of the market back in 2015. This has grown to almost 30% in 2019. This plays right into Purple's niche. What makes Purple unique? Check this mattress out. Have you ever seen a mattress like this, Matt? This is like waffle night at our house. It's a very interesting design. They went out with their scientists and all their people working on this, what is going to make a good mattress.

They landed on this gel-filled polymer waffle grid. What happens is, as you lay on this mattress, and I just laid on one this weekend on Sunday just to test this thing out. As you lay on it, where you don't have a lot of pressure, the mattress holds up, but then it buckles under pressure where your pressure points are and it conforms to your body. Very interesting design.

What makes this interesting is that there wasn't a machine to make the mattress that Purple wanted to make, so they went out and invented the machine that invented their mattresses. This is proprietary technology. They're the only company that can make a mattress like this. Revenue growth has been stellar over the last five years. You're looking at a 78% compound annual growth rate. It's really catching on, and customers love it. No. 1 in customer satisfaction two years in a row, JD Power and Associates.

I wasn't able to find a net promoter score for Purple. However, it says here that 30% of customers learn about Purple through word of mouth. So customers are telling their friends about Purple. Really as you look at this, this is mostly a digital company, this is mostly an e-commerce company, so two-thirds of their revenues actually come from their digital channels. They do partner with 2,300 wholesale locations. Like a Mattress Firm, for example, Mattress Firm will carry Purple mattresses. Those settings are just one of many. But most of their business comes in through e-commerce.

Long-term, in the next three-to-five years, they're expecting $2-$2.5 billion in net revenue, 14%-15% adjusted earnings before interest taxes, depreciation, and amortization. Very good growth targets there. Why do I think that this needs to be on your radar? For one, they're expanding rapidly. They are going to go from 2,300 wholesale locations to about 3,500 in the next few years. They're also increasing their own store count. Only 13 Purple stores today, they're expecting over 200 in the next couple of years.

This is actually to their advantage because not a lot of people know about Purple. Really needs to raise that brand awareness. What I'm looking for from this company is revenue growth and margin expansion. Because they make their mattresses in-house, because they own the manufacturing process, I really would expect the margins to improve as they grow that top line.

Just some rough numbers here. Assuming the low end of the guidance here, five years, $2 billion in revenue, 14% adjusted EBITDA margin. That's $280 million in adjusted earnings in five years. Put a ten times multiple on that, $2.8 billion company versus $1.5 billion today, that might beat the market.