July 27, 2007

$21 Target on SCSS

Having come down off lofty trading highs just over a year ago, Select Comfort (SCSS) shares appear poised to make a comeback in the next six months, according to Zacks senior retail analyst Rob Plaza, CFA. Here's what his most recent report has to say:

“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 14.9 times our 2008 EPS [earnings per share] estimate, which is well below our estimate of the company's long-term earnings growth rate.

“As such, we view this as an attractive valuation. We recommend purchasing the shares on dips. We reiterate our Buy rating. Our target price is $21, which is 19x our 2008 EPS estimate.

“SCSS is a leading specialty mattress manufacturer and retailer. The company markets a line of adjustable-firmness mattresses featuring air-chamber technology, branded the Sleep Number bed, as well as foundations and sleep accessories. Select Comfort's products are sold through its more than 460 stores located nationwide, its national direct marketing operations, at selected furniture retailers, and at selectcomfort.com.”

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