21st Sleep Well Pick - Mission-critical to Public Safety
30% FCF margin, 40%+ FCF per share CAGR at 30x FCF.
The 21st Sleep Well Pick is here. The stock's recent volatility created a perfect opportunity to accumulate shares. In the long term, it will be another Sleep Well winner, keeping my ‘no loser’ record alive.
Leader in a niche that has perennial growth. Less than $5B market cap.
Mission-critical solution to very sticky customers, including federal agencies.
20% organic growth. Additionally, the CEO in transition is allocating more capital to inorganic growth.
Stable and growing free cash flow per share by over 40% CAGR since available financial data (> 5 years).
Temporary negatives are the low ~3% insider ownership and high SBC (1/4 of FCF and growing by a 1/3).
Why now? The management team transition and the uncertainties of government budgets for this niche industry create opportunities to acquire shares at a lower valuation, ~30x free cash flow, and implied growth of just 8% for the next decade—a very reasonable price.
I am also buying this business because it adds a unique defensive angle (an anti-fragility quality) to the Sleep Well Portfolio.
Latest portfolio: 2 baggers, 11 holdings, at 55% CAGR return since Oct 2023.
Transactions record (23/25 are correct decisions), no transactions had more than a 6% loss.
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What is Sleep Well Investments?
Focus on not losing by doing deep research on a few and exceptional niche leaders.
Patiently waiting and thoroughly following up for more buying opportunities.
Let’s dive into the 21st sleep-well pick and why we are accumulating today.