Tempur Sealy International (TPX) Inc is one of the world’s largest bedding providers. The company develops and distributes bedding products globally through its North America and international segments.
The company had a strong first quarter as global net sales were up 27% year-over-year. These results were driven by industry strength and successful company initiatives. They would have been even stronger if not for an industry wide supply chain shortage in Innerspring and chemicals. But the Innerspring shortage is over and management expects more growth going forward.
TPX has a current ratio of 1.4 which indicates it has more than enough liquidity to handle short-term obligations. The company also has a sky-high return on equity of 132.3% which means that management is extremely efficient. Over the past five years, earnings have grown an average of 41%. Analysts expect earnings to soar 229.4% in the current quarter.
The stock appears undervalued with a forward P/E ratio of 13.85. The stock has been in an uptrend for most of the past year leading to a Momentum Grade of B in our POWR Ratings system. But performance has been mixed over the past couple of months as shown in the chart below.
Take a look at the 1-year chart of TPX below with added notations:
Chart of TPX provided by TradingView
TPX had been on a steady trajectory higher for most of the past year but has now moved into a sideways trading range. While in the range, the stock has formed a resistance level at $40 (red), and an area of support at around $35 (green).
At some point, the stock will have to either break the resistance or the support. The possible long position is on a breakout above $40. The ideal short opportunity would be on a break below $35.
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TPX shares were trading at $37.59 per share on Wednesday morning, down $0.03 (-0.08%). Year-to-date, TPX has gained 39.77%, versus a 14.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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