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Select Comfort Corp. (SCSS): This Bedding Retailer is a Buy

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Recently, one of my friends asked me about bedding retailer Select Comfort Corp. (NASDAQ:SCSS). Since the beginning of the year, Select Comfort has dropped by 20.10% to around $21 per share. Interestingly, famous investors, including Joel Greenblatt and Steven Cohen, have added Select Comfort shares to their portfolios. Let’s take a closer look at Select Comfort to determine whether or not it is a buy at its current price.

Consistent growing operating performance

Select Comfort Corp

Select Comfort Corp. (NASDAQ:SCSS) is the owner of the SLEEP NUMBER beds and bedding products, operating around 410 stores at the end of 2012. In the past five years, Select Comfort has managed to consistently grow the average net sales per store, from $1.32 million in 2008 to $2.16 million in 2012, and its net sales per square foot, from $1,024 to $1,324 during the same period. Thecompany had quite a diverse customer base, as no single customer represented for 10% or more of the company’s total revenue.

What I like about Select Comfort Corp. (NASDAQ:SCSS) is its consistent double-digit comparable store sales growth in the past three years. Since 2010, its comparable store sales have grown at the rate of 19% to 26%. In 2012, the comparable store sales growth stayed at as high as 23%. Its adjusted EBITDA has experienced a continued upward trend as well. Since 2009, its adjusted EBITDA has risen from $42.3 million to nearly $150.3 million.

Debt-free and cheap

Moreover, I like the fact that it employs no debt in its operations. As of March 2013, it had $210 million in total stockholders’ equity, $143 million in cash and short-term investments, and no debt. Its contractual obligations do not seem to be a burden for the company as it had to fulfill nearly $41.5 million in less than a year and nearly $57 million in 1-3 years. Select Comfort Corp. (NASDAQ:SCSS) is trading around $21 per share, with the total market cap of around $1.2 billion. The market values Select Comfort at around 7 times EV/EBITDA.

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