Stocks to Buy Before They Join This Market Rally: Tempur Sealy (TPX)
YTD Performance: -33%
It’s been a roller-coaster ride for Tempur Sealy International Inc (NYSE:TPX) over the past 18 months. TPX stock tanked in late 2015 and early 2016 during the last market correction. It soared off the back of Q2 earnings in July, then plunged again after warning of weaker-than-expected Q3 results.
TPX enjoyed the post-election rally before a stunning disclosure: The company was terminating its contracts with major retailer Mattress Firm. The stock declined 28%, and even with a strong fourth quarter report in February, has stayed relatively flat since.
The loss of Mattress Firm isn’t something to be ignored. But neither are the positive attributes for TPX. Both Tempur-Pedic and Sealy remain well-known, higher-end brands with committed customer bases. Increased consumer confidence and new home sales should be a driver going forward: there’s a reason TPX stock gained along with the broad market heading into the Mattress Firm disclosure.
Meanwhile, TPX stock is cheap, trading at barely 11x 2016 adjusted EPS. The company changed its corporate charter last week to make it easier for an acquisition offer, and private equity could see value in the company.
This one may take some time, but TPX stock should see improvement at some point in 2017.