May 2, 2007

$23 Price Target on Select Comfort

From Zacks:

Zacks senior retail analyst Rob Plaza, CFA is reiterating his Buy recommendation on shares of furniture-maker Select Comfort (SCSS). For details, we excerpted the following from today's Buy report:

"We remain positive on Select Comfort shares, due to its significant long-term growth potential. The company's long-term goals include annual sales growth of 15% and annual earnings growth of 20%.

"What's more, the stock is trading at 17.8 times our 2007 EPS [earnings per share] estimate and 14.4 times our 2008 EPS estimate. We view this as an attractive valuation. We recommend purchasing the shares on dips. We reiterate our Buy rating and our target price of $23.

"Despite the below trend growth in the first quarter, Select Comfort increased its gross margin by 190 basis points. This is important because it shows that the company is not trying to chase sales with discounted prices. Select Comfort's second quarter outlook calls for earnings below year-ago last year's $0.19 per share. The company is one of the fastest growing companies in the furniture business."

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