A number of companies saw a huge sales climb during the pandemic. There was a shift to anything related to being at home, and the one surprise investors perhaps didn’t consider at first? Sleep.
Sleep Country Canada Holdings (TSX: ZZZ) proved that sleep has never been as important as it is today. And the pandemic really motivated a huge increase in that belief. The TSX stock surged in share price, but has since dropped back.
Yet, with earnings on the way and the market down, analysts believe now could be a great time to reconsider the stock. Let’s look at why.
Incoming positive news
Analysts recently came out with predictions for Sleep Country stock, marking the TSX stock as an outperformer for 2023. Granted, this may not occur until halfway through the year. “Soft consumer confidence” and “weak housing sales” have impacted the stock in the past. But that should change soon.
In particular, analysts peg the potential for more mergers and acquisitions, as well as further brand partnerships. Therefore, capital returns should be “robust,” as one analyst put it. Therefore, with underperformance in the past, analysts have started to increase their price targets.
Undervalued
All considered, investors should definitely consider Sleep Country stock undervalued at this point. And the fundamentals certainly line up with this notion. The TSX stock trades at just 9.7 times earnings at the time of writing. Further, ZZZ trades at 2.2 times book value, with just 87.9% of its equity needed to pay off all of its debts.
On top of this, the TSX stock currently offers a dividend yield at 3.49%. Combined, we should now look at the performance of ZZZ stock. Not just in the last few months, however. Instead, consider the last few years.
Why? Because what investors should look for is a company that can come out the other side of a downturn and continue trading strong. The pandemic saw an increase in the TSX stock, and it has come down since heights achieved in November 2021. However, over time, it has done quite well.
Shares are up 90% in the last decade alone. That’s a compound annual growth rate (CAGR) of 8.8%. Yet shares are down 12% in the last year, though they started to climb mid-February.
Earnings coming!
On March 2, the TSX stock will come out with earnings. After two quarters of beating earnings estimates, the company’s most recent earnings report came below estimates. This next one should perhaps show signs of improvement from the holiday season. What’s more, the maker of high quality sleep products is hopefully going to have way more news to announce to investors.
Therefore, this is the one TSX stock I would consider buying this week. One that remains down, and could turn on a dime after earnings. And that climb could see it climb back to share prices we’re unlikely to see until either the next downturn, or never again. That news will certainly help anyone sleep better at night with this TSX stock in their portfolio.
