Sleep Country (TSE:ZZZ) might well be Canada’s leader in getting a good night’s sleep, but the stock itself is fitful and uneasy right now, down fractionally in Wednesday afternoon’s trading. The biggest reason seems to trace back to its earnings, which did not come out the way anyone would have hoped. It wasn’t all bad news at Sleep Country, though it was enough to make investors toss and turn a bit.
The good news was that revenue was on the rise; it brought in $209.7 million, which compares quite favorably against the $206.5 million that it saw back in 2023’s first quarter. However, it didn’t manage to hold on to as much of that cash it brought in; it earned $8.7 million, or about $0.26 per diluted share for the first quarter of 2024. The first quarter of 2023, meanwhile, saw it bring in $11.3 million, or $0.32 per diluted share.
Focusing on the Wrong Priorities?
This report comes at an odd time for Sleep Country as a whole; it’s just celebrated its 30th anniversary as a company. It’s been working on “social responsibility issues” and staging partnership efforts that focus on climate change. What those have to do with a good night’s sleep isn’t exactly clear, and may be part of Sleep Country’s constant run of mixed results.
Reports also suggest that cash may be increasingly tougher to come by for Sleep Country. Operating cash flow growth is expected to drop from 13% next year to 9.7% the year after. Growth is growth, certainly, but when the growth rate slows far enough, it becomes decline instead.
Is Sleep Country Stock a Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on Sleep Country stock based on four Buys and three Holds assigned in the past three months, as indicated by the graphic below. After an 11.06% rally in its share price over the past year, the average ZZZ price target of C$31.64 per share implies 16.17% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
