Select Comfort Corp. (SCSS)

TMFPlatoish (32.28) Submitted: 7/03/06 7:37 PM : Start Price: $22.13 SCSS Score: -92.43

This is a well-positioned company that dominates its catagory. They have a complete top to bottom vertical integration model that gives them good control over all aspects of their business. They are the largest mattress retailer in the US. They employ a build to order manufacturing model that lets them operate in a negative working capital position, thus generating tons of free cash flow. Their growth and expansion strategy is clearly articulated and management seems to be top notch. They have ownership of all of their customers because of their involvement in delivery of the product and therefore have a valuable mailing list from which to generate repeat business. Their customer referrel program is extremely effective in earning new customers. They should be able to retain earnings growth in the 20% to 30% range for the next five years. New advertising campaign looks to be a big improvement as the healthful aspects of quality sleep are being emphasized. They are too generous with options currently and I would like to see this phased down.

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