Why You Should Not Sleep On SNBR Ahead of Earnings

Sleep Number is shaping up to be a potentially ideal growth play

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Sleep Number Corporation (NASDAQ:SNBR) is an American manufacturer of smart beds. SNBR makes its Sleep Number and Comfortaire branded beds, as well as foundations and bedding accessories. Sleep Number's smart beds are informed by science and sleep sessions collected from real-world sleep data. This morning, Sleep Number stock was last seen up 0.2% at $114.26.

Last week Sleep Number announced that the company will be releasing its second quarter of 2021 financial results after market close on Tuesday, July 20. Sleep Number has outperformed earnings expectations on all four of its most recent earnings reports and is looking to beat current analyst estimates of an earnings per share (EPS) $1.07 for the second quarter of 2021 next week.

Let's take a quick look back at the details of SNBR's four-in-a-row sweep in the earnings box. For Q2 of 2020, Sleep Number beat analysts’ estimates by a margin of $0.22 and report an EPS of -$0.45. For Q3 of 2020, SNBR's EPS increased to $1.79 and outperformed expectations by a margin of $0.73. For Q4 of 2020, Sleep Number posted another increase in earnings, rising to $2.19 per share and beating estimates by a margin of $0.75. For Q1 of 2021, Sleep Number reported an increased EPS of $2.51 and beat expectations by a margin of $0.68.

Sleep Number stock has increased by approximately 112% year-over-year and is up 170% from its September bottom of $42.15. Additionally, shares of SNBR have grown by 44% year-to-date, but remains 25% off its March high of $151.44.

From a fundamental point of view, SNBR nearly checks all of the boxes necessary for a successful growth company. Sleep Number stock trades at a price-earnings ratio of 19.05 and has a forward price-earnings ratio of 18.18, which is impressive in todays’ market and even more so considering how fast the company is growing                           

Sleep Number’s biggest fundamental flaw can be found in its balance sheet, where the company carries $677 million in total debt and only $2.24 million in cash. Nonetheless, almost all signs seem to point towards continued growth in the coming years for Sleep Number stock.

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