Somnigroup International Inc. Common Stock (SGI)

FairStock Score: 47/100 — MIXED

Key Financials

Strengths

• Generates $623 million in annual free cash flow (3.8% yield on market cap)
• High return on equity of 20.9% demonstrating efficient capital deployment
• Revenue growth of 54.7% demonstrates strong top-line momentum
• Established organization with 19,000 employees providing operational scale

Concerns

• Trades significantly above Graham Number ($25) with negative 218% margin of safety—limited downside protection
• High leverage at 2.14x debt-to-equity increases financial risk and interest expense burden

AI Analysis

Somnigroup International Inc. Common Stock is a mid-cap consumer cyclical company valued at $16.6 billion. The business generates $7.5 billion in annual revenue with a 1.9% net margin and $623 million in free cash flow. From a quality standpoint, Somnigroup shows Altman Z-Score of 1.8 in the grey zone and strong 21% ROE. On valuation, the stock is commanding a steep 43.2x multiple, with trades far above its Graham Number ($25) with no margin of safety. Growth dynamics show revenue growing at 54.7% and profit growth of 95.8%. Our composite FairStock Score of 47/100 reflects mixed fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

Somnigroup's 55% revenue growth trajectory could accelerate as it captures additional market share in the consumer cyclical sector. With $623 million in annual free cash flow (3.8% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

At 43x earnings, any growth disappointment triggers rapid multiple compression—a 20% earnings miss plus multiple contraction to 20x implies 40%+ downside. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer