Running Even With Apple YTD, Tempur-Pedic Shares Start to Look Pricey
Investors in mattress maker Tempur-Pedic International (TPX) undoubtedly have been sleeping like babies. The company has posted steady growth in profits, and the stock has been enjoying a meteoric run over the past couple of years.
Tempur-Pedic has even nearly matched Apple's (AAPL) 50% rise year-to-date.
But somebody should rouse investors from their peaceful sleep. The stock has become rather expensive, getting a "poor" Pro Value Score from YCharts Pro, and is about 45% above its historical valuation.
Tempur-Pedic has a higher PE ratio than Apple.
Even on a forward basis, Tempur-Pedic's PE for 2012 is 21.3 compared to 14 for Apple.
The company's earnings-per-share growth has been strong, but it appears to be slowing. After gaining 47% in 2011, Tempur-Pedic guided the market to expect a roughly 24% gain this year, excluding any benefits to be gained via the company's $250 million share buyback program for 2012.
Tempur-Pedic also guided sales expectations lower for the year. Sales grew 28% in 2011, but not are only expected to grow by 15%.
Operating margins had been on a steady climb but slipped in the fourth quarter due, in part, to a 35% rise in selling and marketing expenses. "Over the next year, we plan to increase our rate of investment in areas that will drive growth including a major new product launch, increased advertising, and expanded distribution," said Tempur-Pedic CEO Mark Sarvary.
With higher costs on the way, perhaps investors should start sleeping with one eye open.