My dueling opponent labels his analysis of Select Comfort
It's hardly conventional to call the current stock price "fair value" when plugging a discounted cash flow analysis with a growth rate that is 3.5% a year less than the average analyst estimates for five-year annual growth.
Why bring Krispy Kreme
My opponent and his wife love their Select Comfort bed. "We wouldn't trade it for anything," he says. Then he bashes the current marketing and the company's decision for a new marketing executive. Let's just assume, for amusement, that the company's marketing was totally worthless. What's selling beds, then? Could it be word of mouth -- the best form of getting a message out?
"Loathe the marketing (and the future marketing executive) and love the bed" is just one person's opinion. The opinion that counts is the customer's, and Select Comfort buyers are voting with their wallets, making the Sleep Number bed a financial success.
How successful? The stock is 7.7 times what it was five years ago (and that's at Wednesday's $17.86 closing price, not the $32.32 price reached in late 2004). I wish that was a conventional return for stocks in my portfolio!
Add it up. There is a great product (no disagreement there), there's an expected 23.5% compounded annual earnings growth for the next five years, and the stock sells for a measly 17.9 times this year's low-end earnings guidance. You'd have to throw convention to the wind to be bearish on this company.
Wait! You're not done. This is just a quarter of the Duel! Don't miss Seth Jayson's bearish beginning, W.D.'s bullish argument, and Seth's rebuttal. When you're done, you're still not done. You can vote and let us know who you think won this Duel.
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Fool contributor W.D. Crotty does not own shares in any of the companies mentioned but is stuck in a "30-year time warp." He clearly remembers seeing original screenings of the Bionic Woman TV series.Clickhereto see The Motley Fool's disclosure policy.