Select Comfort Corporation (SCSS) six consecutive positive earnings surprises have pushed the stock to double its price since June of 2010. Rising estimates in 2013 make this stock a Zack Rank #1 (Strong Buy).
Company Description
Select Comfort Corporation is a bed manufacturer and retailer. The Company designs, manufactures, markets and distributes beds and other sleep-related accessory products.
Great Earnings Streak
Over the last six quarters, Select Comfort has delivered six earnings surprises, the smallest of which occurred last quarter when the company reported earnings 14% ahead of the Zacks Consensus Earnings Estimate. The beats have been significant over that time, averaging 32% ahead of expectations.
Surprisingly, the beats have not always translated into similar price impacts on the stock. In the March 2011 quarter, the company beat the Zacks Consensus Earnings Estimate of $0.17 by $0.03 or 17% but still saw the stock drop by just under 3%.
The September 2011 quarter earnings release, which is generally in the first week of February the following year, is calling for earnings per share of $0.21. This is up more than 100% from the $0.10 it reported a year ago, but down $0.06 from the most recent earnings release. The September quarter was weaker then June quarter in 2010.
Sleep number beds bring in bucks
As long as sleepers continue to count fewer and fewer sheep, SCSS will keep on counting more and more bucks. Despite reports of fewer beds being sold in October of 2011, the price per bed increased in the double digit percentage range for the fourth consecutive month. SCSS’s Sleep Number bed, which ranges in price from $899 to $5,000 falls in that category.
Shares of SCSS are not cheap by most valuation metrics, including a 11.9x price to book valuation vs. and industry average of 1.5x. Price to earnings valuations are a little better, with the company trading 24.9X trailing twelve months earnings and 18.5x the next twelve months earnings. Those multiples are still at a premium to industry.
The Chart
SCSS holds a Zacks #1 Rank (Strong Buy), in part, due to consistent earnings increases from multiple analysts. A look at the price and consensus chart below shows how higher earnings estimates have led the stock higher.
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service
