Sleep Well with Mattress Firm

03/24/2014 7:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Our latest featured breakout stock recommendation is a Houston, Texas retailer of mattresses, with annual revenues of $1.2 billion, notes technical analyst Leo Fasciocco, editor of Ticker Tape Digest.

Mattress Firm Holding (MFRM) offers both traditional and specialty mattresses, bedding accessories, and related products. MFRM also offers bed frames, pillows, tempurpedic pillows, headboards, and memory foam mattresses.

The stock has broken out from an 11-week, cup-and-handle base. The move was triggered by the company upping its earnings forecast for the year.

MFRM reported earnings for the fourth quarter increased to 25 cents a share from 22 cents a year ago. The reported earnings topped the consensus estimate by one cent a share.

Analysts are forecasting 14% increase in MFRM's earnings for the fiscal year ending in January of 2015. They look for net of $1.90 a share, up from $1.66 in fiscal 2014. Going out to fiscal 2016, profits are expected to climb 19% to $2.25 a share.

The stock came public back in late 2011, trading around $22. It soared to a peak of $48 in 2012, before falling back sharply to $22. Since then, the stock has worked higher to get close to its prior peak.

We are targeting MFRM for a move to $54 off this breakout. A protective stop can be placed near $44.50.

A key fund buyer recently was the 4-star rated Wasatch Small-Cap Growth Fund which purchased 405,738 shares. That gave it a 1.2% stake in MFRM. The largest fund holder is Baron Small-Cap Retail Fund, 4-star rated, with a 4.4% stake.

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