Tempur-Pedic International (NYSE: TPX) makes bedding products. Offerings include pillows, mattresses, adjustable beds and cushions. The goods feature a visco-elastic foam technology that was developed by NASA during the 1970s, to help cushion astronauts during liftoff. The company markets its products through furniture and department stores, medical retailers, hospitals and the Internet. They are sold under the brand names TEMPUR and Tempur-Pedic. About a third of Tempur-Pedic's revenue comes from international sales.

The company pleased investors last week, when it reported Q2 EPS of 27 cents and revenues of $238.7 million. Analysts had been looking for 23 cents and $232.9 million. Over the course of the quarter, the firm increased its cash balance by 46.8% and reduced total debt by 6.8%. Management also issued in-line guidance for FY08 results.

The stock popped on the news and then moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with two "strong buys", three "buys" and ten "holds". The TPX P/E ratio (6.71), PEG ratio (1.04), Price to Sales ratio (0.69), Price to Cash Flow ratio (5.04), Price to Free Cash Flow ratio (6.95), Operating Margin (18.79%), Return on Assets (14.57%), Return on Investment (17.33%) and Return on Equity (83.14%) compare favorably with industry, sector and S&P 500 averages. Over the past 52 weeks, the stock has traded between $7.05 and $37.87. A stop-loss of $8.95 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.