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No. of Recommendations: 4
Back in October '05, after a similar duel on SCSS, I had given a very bullish rating to SCSS.
That time, Mr. Jayson was bearish on the stock; today it's Mr. Saletta.
Back then it was selling for under $11.66(split adjusted), and per my calculations, at least 33% below its intrinsic value. Since then, the stock price has more than doubled. Yet even today, per my DCF calculations, its intrinsic value is about $28 while it's selling for just over $24, again giving a MOS of around 15%. If previous six quarters are any indication, they will keep beating the estimates handily, which will mean that even this valuation is conservative enough .
SCSS has products that are the only viable alternative to traditional inner spring mattresses and their market share is still in single digits, with a tremendous room to grow. That's why it does not matter much that the same customer will not buy the company's product for the next two decades. With a LOT of room to grow, SCSS can keep convincing other mattress owners to convert. And that's only the domestic market. It could keep improve the technology, keep driving down the manufacturing cost, and provide better value proposition than today. Eventually, it can expand into international markets similar to the US; Europe for example.
SCSS is one of those classic stocks that can be held on for decades. On price dips, I have been adding to its position whenever possible; and it's served me well.
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