2-Star Stocks Poised to Plunge: Select Comfort?

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, mattress maker Select Comfort (NAS: SCSS) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Select Comfort's business and see what CAPS investors are saying about the stock right now.

Select Comfortfacts

Headquarters (Founded)Minneapolis (1987)
Market Cap$1.21 billion
IndustryHome furnishing retail
Trailing-12-Month Revenue$702.8 million
Management

CEO William McLaughlin (since 2000)

CFO Wendy Schoppert (since 2011)

Return on Assets (Average, Past 3 Years)16.4%
Cash/Debt$116.4 million / $0
Competitors

Sealy (NYS: ZZ)

Tempur-Pedic International (NYS: TPX)

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 12% of the 2,865 members who have rated Select Comfort believe the stock will underperform the S&P 500 going forward. These bears include pbk100 and All-Star TSIF, who is ranked in the top 0.1% of our community.

A few months ago, pbk100 just couldn't get comfortable with Select Comfort's valuation: "Priced for high growth, in a very economically sensitive business. If 401k values fall, housing stays in a slump, unemployment persists, then that extra $1000 is going under the mattress, not into one."

Select Comfort even sports a particularly stomach-churning beta of 4.2. That's even higher than that of volatile furniture plays like Sealy (3.5), Tempur-Pedic (2.0), and Furniture Brands (NYS: FBN) (3.4).

CAPS All-Star TSIF elaborates on the bear case:

[T]his is a short term down thumb as Select Comfort nears a five year high. Growth looks decent, but it's hard to believe in it in this economy and even if I did I won't believe a 20% upside unless it was influenced by the shorts who had to cover. If I'm right, this will decay back down in a few days and more bad news in Europe could drop it hard as people scramble for covers and are less focused on mattresses. Overall, good job Select Comfort ... but I'm hoping for a soft landing and a lower altitude.

What do you think about Select Comfort, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

Interested in another easy way to trackSelect Comfort?Add it to your watchlist.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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