The Emperor Has No Clothes
Long/short equity, Deep Value, special situations

Tempur Sealy - Protected Downside With Significant Upside

1) Introduction & Valuation

We believe Tempur Sealy (NYSE:TPX) is worth $70 based on multiple of 11x 2015E EBITDA, 5% sales growth and a minor 80 basis point gross margin expansion. This valuation could be conservative given the ongoing international expansion, potential synergies from the Sealy acquisition and TPX's dominant position in the mattress space. This could represent an 18% IRR over 24 months.

At present, TPX is trading at 11x 2014E EBITDA, 17x 2014E EPS and generates free cash flow yield of 4%. TPX is currently involved in reviving the Sealy business to grow sales, however even failing to deliver growth, we believe TPX is still worth $45 (based on gross margins that contract ~1.5% to 39.5%...

Join Seeking Alpha PRO to read this archived article and 11,574 other archived articles
IDEA GENERATORXExclusive access to 10 PRO ideas every day
INVESTING IDEAS LIBRARYXExclusive access to PRO library of more than 15,000 ideas
SECTOR EXPERT NETWORKXExclusive access to all sector experts for direct consultation
PERFORMANCE TRACKINGXTrack performance of all PRO stock ideas
PROFESSIONAL TOOLSXProfessional Idea Filters to zero-in based on industry, market cap and more
PRO Top long ideas returned 21.7% in 2016**
"As a PRO member, we get uniquely valuable perspective that go beyond our quantiative analysis... We rely on PRO to get beyond the numbers quickly and add much needed perspective. It keeps me ahead of the next big thing. - Mark Choate, Malaga Cove Capital"
Mark Choate, Malaga Cove Capital
"Contributors (writers and commentators), often have a long history in the secuirities they opine on and some are clearly well positioned industry participants with detailed industry views that can help provide color on where the skeletons are buried in a particular secuirity and/or industry."
Jim Roumell, Roumell Asset Management
You may cancel at any time for any reason, and receive a prompt refund for membership on months paid and not used (max. 6 months). Details