Purple Innovation: A Comfortable Speculative Bet

Summary

• Purple Innovation's gel technology differentiates the company’s offerings from its competitors.
• The company is seeing high revenue growth. In the last quarter revenue increased by 59.4% compared to the same time last year.
• Considering the growth trajectory of the company its current valuation of 1.4x sales is pretty compelling.

I believe adding a few speculative stocks to a diversified portfolio is a good way for investors to get better returns. A key task of analyzing these types of stocks involves understanding the unique value proposition of the company. A company that had spectacular returns in the past six months that I believe still has room for growth is Purple Innovation (NASDAQ:PRPL) due to the company's unique value offering.

Unique Value Proposition

Just a brief background on the company, Purple Innovation is an e-Commerce focused manufacturer and retailer of mattresses, pillows, cushions, and other adjacent products. At the core of the company's product line is its proprietary gel technology. This technology differentiates the company's offerings from its competitors and has won the company many accolades. The company itself is vertically integrated as it handles the design, development, marketing, and manufacturing of its products. Purple Innovation believes its unique products form its competitive advantage as they do not make use of commoditized materials such as foam and springs.

Having a unique product forms a durable competitive advantage because if a customer is in the market for a specific type of memory foam or spring mattress they have an assortment of brands to choose from. Meanwhile, if a customer can be swayed to a gel bed then a Purple brand mattress is the only choice. It could be argued that a key weakness for the company could be that not everyone would enjoy a gel bed like purple. Some reviews have said that the gel mattress takes a bit of getting used to. However, if the company can corner the market on people that do like this type of mattress then it could be very profitable for the company.

Shop Purple Comfort - Mattresses, Pillows, Seat Cushions & More

In connection with

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, but may initiate a long position in PRPL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Caveat emptor! (Buyer beware.) Please do your own proper due diligence on any stock directly or indirectly mentioned in this article. You probably should seek advice from a broker or financial adviser before making any investment decisions. I don't know you or your specific circumstances, therefore, your tolerance and suitability to take risk may differ. This article should be considered general information, and not relied on as a formal investment recommendation.