We’re over a year into the Covid-19 pandemic and so many aspects of our daily lives have changed that it’s difficult to count them all. While many are negative, there have been a few bright spots as well. With Americans spending more time than ever in their homes and with additional discretionary income left over from not dining out or vacationing, they’re upgrading their living situations like never before.

Sleep Number (SNBR Quick QuoteSNBR - Free Report) has been one of the beneficiaries of those home investments.

To be sure, Sleep Number products are not inexpensive. During an economic recession when many are unemployed and budgets are strained, consumers stop buying luxury items first. That’s obvious, right?

As clear as it might seem, it’s also not actually correct.

Sleep Number is in a somewhat unique position of providing products that appeal directly to what people are craving most during unsettling times – a good night’s sleep. It’s a tired cliché to describe a conservative investment as,” “something that lets you sleep at night,”  but in the case of Sleep Number, it’s true – both figuratively and literally.

You’d like your bed firmer? No problem. Softer? That’s fine, too. Warmer, cooler? You can have either. Your partner is snoring and you’d like to give them a nudge but don’t want to wake them up? The Sleep Number bed can be programmed to provide a gentle position adjustment.

Founded more than 30 years ago and quickly becoming the first large-scale manufacturer of high-tech pneumatic mattresses, Sleep Number owns 40 unique patents on the technology and dominates the market. Through a network of more than 600 retail locations, direct marketing and internet sales, Sleep Number has made their name basically synonymous with the concept of adjustable sleep technology.

During a pandemic that has changed the way everyone shops, Sleep Number transitioned seamlessly to a sales model that allows customers to buy what they want online.

Loyal customers support the brand and provide basically free marketing for Sleep Number, using social media to extol the virtues of the company’s technologies and the customizable nature of having your side of the bed exactly the way you like it - even if your partner prefers something much different.

Sleep number isn’t just a compelling story however, it’s also a great business. In the most recent quarter, the Zacks Consensus Earnings Estimate was for profits of $1.53/share and Sleep Number blew it away with a net of $2.19/share.

The last four quarterly reports were beats of 43%, 77%, 25% and 97%.

After hitting an intraday high near $61/share last February, Sleep Number saw its market cap slide by almost 75%, closing at $15.55/share early in April. Since then, the shares have risen over 800% - closing at $143.09/share on Tuesday. 

Despite that incredible rally, the company remains a great value, trading at a forward 12 month P/E ratio of 22X. That’s due in part to a full year 2021 consensus estimate that has risen from $4.32/share to $6.10/share over the past week. The 2022 estimates have risen as well – from $4.79/share to $6.68/share.

Though it might not have seemed like an obvious choice in the past, Sleep Number has emerged as the supplier of some of the most in-demand goods right now, With a strong balance sheet and excellent (and improving) gross margins, the company that specializes in providing comfort during uncomfortable times can also provide a measure of that same comfort in your portfolio.

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