Tags: Temper-Pedic | rally | growth | TPX

Temper-Pedic Price Rally on Growth

By    |   Friday, 11 Nov 2011 10:23 AM

Mattress manufacturer Temper-Pedic International (TPX) produced an autumn share price rally on the back of strong financial growth. The company's balanced distribution system and high profit margins should allow these profit trends to continue. TPX may be a classic buy-on-the-dips long term growth stock.

Temper-Pedic produces its signature special material mattresses and pillows in factories in North America for sales in the United States and Canada and in a factory in Denmark for international sales. Approximately 70 percent of sales come from North America and the balance from international sales to 80 countries. Temper-Pedic products are sold through both direct sales channels and through retail furniture stores.

The results Temper-Pedic posted for the 2011 third quarter closely matched the gains for the first three quarters of the year. In the nine months, revenues were up 29 percent to $1.05 billion from $813 million.

Net income for the nine months was $2.34 per share, up 50 percent from $1.51 in 2010. The earnings estimates for 2011 and 2012 are $3.16 and $3.77, respectively, compared to $2.16 in 2010.

Strong profit margins

The impressive figure on the Temper-Pedic income statement is the amount of revenue which reaches the bottom line. Net income before tax is 24 percent of revenues. Combining this level of profitability with projected revenue growth rates of close to 20 percent for the next five years points to a continued pattern of growing profits.

The market likes the Temper-Pedic growth. Shares are up more than 200 percent in the last year, while competitors such as Leggett & Platt (LEG) and Select Comfort (SCSS) are in negative return territory. Yet TPX is still trading at a forward P/E of less than 18.

The analysts at Piper Jaffray recently increased their target price on the stock by $10 and reiterated a buy rating. In September, Goldman Sachs analysts initiated coverage on Temper-Pedic with a neutral rating.

The company next reports on Jan. 19.

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Mattress manufacturer Temper-Pedic International (TPX) produced an autumn share price rally on the back of strong financial growth. The company's balanced distribution system and high profit margins should allow these profit trends to continue. TPX may be a classic...
Temper-Pedic,rally,growth,TPX
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2011-23-11
Friday, 11 Nov 2011 10:23 AM
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