NEW YORK (TheStreet) -- Specialty bedding retailer Mattress Firm (MFRM) has been a darling for shareholders, returning gain of almost 170% since the Houston-based company went public in 2011. This includes almost 100% gains just in the past three year, dominating the broader averages during both periods. For that reason, it's time to consider taking some profits.
Like most young companies, Mattress Firm (founded in 2007) has sought growth my any means necessary, including picking off a string of companies that has helped MFRM deliver sales that are still growing at astonishing rates, including a 92% surge in the fourth quarter. While the company still has some runway for growth, investors should pay attention to how much of that growth is organic.
Fast-growing business can't maintain their growth rates indefinitely, much less levels of above 50%. At some point, Mattress Firm will run out of companies to buy. And the company will then have to rely on its underlying business, or the part of the operation that can make money on its own absent of M&A deals and other exterior factors. As evidenced by the recent spike in MFRM short interest, some investors don't think the company can do it.
Meanwhile, there is nothing about MFRM shares today that scream value. Sure, the stock -- up just 1.7% on the year -- hasn't performed as well as it has in the past. But at 46 times earnings, against a 21 P/E for the S&P 500, there is still a lot of implied growth built into these shares.