Is Now the Time to Buy Select Comfort Corp. (SCSS)? – Tempur-Pedic International Inc. (TPX), Mattress Firm Holding Corp (MFRM)

At the time of its earnings release, Select Comfort was expecting a 15%-26% increase in full-year earnings for 2013, fueled by targeted comparable-store sales growth of 10% annually. By year’s end, the company is looking to boost its store count to 445 from the aforementioned 410 currently. While that will raise expenses, yet again, as well as increas marketing costs, the top-line growth and solid operating margins should keep growth propped up.

Fast forward to last week, when the company hit a 52-week low. Management announced that February sales had been softer than they expected, due to a combination of consumer sentiment and poor media buying. This should prevent the company from reaching its first quarter goals, but ultimately is to be viewed as a short-term aberration. Still, the stock sank double-digits.

What now?
At nine times 2013 expected earnings, Select Comfort is far less expensive than competitor Tempur-Pedic International Inc. (NYSE:TPX) at more than 15 times forward earnings. Tempur-Pedic International Inc. (NYSE:TPX)is a similarly volatile stock that can crash double digits if management whispers any derivative of the phrase “softened demand.”

Given the company’s growth prospects, but with volatility in mind, investors should only look at Select Comfort as a long-term play on the housing recovery and the continued build-out of company-owned stores, which seem to be driving growth. Competition in this space is fierce, and non-premium brands, such as Mattress Firm Holding Corp (NASDAQ:MFRM), have stepped up to try and take a piece of the space currently dominated by the Tempur-Pedic International Inc. (NYSE:TPX) and Select Comfort duopoly.

Short-term fluctuations will likely swing the stock wildly, as it has in the recent past. Five-year performance of Select Comfort Corp. (NASDAQ:SCSS) shows near 360% growth. Tempur-Pedic International Inc. (NYSE:TPX) has risen 170%. Does the stock still have room to grow? Current valuation and growth prospects suggests yes; just don’t check in on your stock every day.

The article Is Now the Time to Buy Select Comfort? originally appeared on Fool.com and is written by Michael B. Lewis.

Fool contributor Michael B. Lewis has no position in any stocks mentioned. The Motley Fool owns shares of Tempur-Pedic International.

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