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A Look At The Intrinsic Value Of Tempur Sealy International Inc (NYSE:TPX)

Today I will be providing a simple run-through of the discounted cash flows (DCF) method to estimate the attractiveness of Tempur Sealy International Inc (NYSE:TPX) as an investment opportunity. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. If you are reading this after June 2018 then I highly recommend you check out the latest calculation for Tempur Sealy International here.

Is TPX fairly valued?

I use what is known as the 2-stage model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second ‘steady growth’ period. To start off, I use the analyst consensus forecast of TPX’s levered free cash flow (FCF) over the next five years and discounted these values at the rate of 12.43%. This resulted in a present value of 5-year cash flow of US$672.82M. Keen to know how I calculated this value? Check out our detailed analysis here.

NYSE:TPX Future Profit Jun 20th 18
NYSE:TPX Future Profit Jun 20th 18

Above is a visual representation of how TPX’s top and bottom lines are expected to move going forward, which should give you some color on TPX’s outlook. Secondly, I calculate the terminal value, which is the business’s cash flow after the first stage. I’ve decided to use the 10-year government bond rate of 2.8% as the stable growth rate, which is rightly below GDP growth, but more towards the conservative side. The present value of the terminal value after discounting it back five years is US$1.69B.

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The total value is the sum of cash flows for the next five years and the discounted terminal value, which results in the Total Equity Value, which in this case is US$2.36B. The last step is to then divide the equity value by the number of shares outstanding. This results in an intrinsic value of $43.47, which, compared to the current share price of $50, we find that Tempur Sealy International is fair value, maybe slightly overvalued and not available at a discount at this time.

Next Steps:

Whilst important, DCF calculation shouldn’t be the only metric you look at when researching a company.

For TPX, there are three fundamental aspects you should further examine:

  1. Financial Health: Does TPX have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

  2. Future Earnings: How does TPX’s growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.

  3. Other High Quality Alternatives: Are there other high quality stocks you could be holding instead of TPX? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

PS. Simply Wall St does a DCF calculation for every US stock every 6 hours, so if you want to find the intrinsic value of any other stock just search here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.