Critical Review: Sonos (NASDAQ:SONO) vs. Sleep Number (NASDAQ:SNBR)

Sleep Number (NASDAQ:SNBR) and Sonos (NASDAQ:SONO) are both consumer discretionary companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, analyst recommendations, profitability, valuation, risk, earnings and dividends.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Sleep Number and Sonos, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sleep Number	2	2	0	0	1.50
Sonos	0	3	2	0	2.40

Sleep Number presently has a consensus target price of $3.50, indicating a potential upside of 2,700.00%. Sonos has a consensus target price of $20.00, indicating a potential upside of 12.99%. Given Sleep Number’s higher possible upside, equities analysts clearly believe Sleep Number is more favorable than Sonos.

Risk and Volatility

Sleep Number has a beta of 2.49, meaning that its share price is 149% more volatile than the S&P 500. Comparatively, Sonos has a beta of 1.88, meaning that its share price is 88% more volatile than the S&P 500.

Earnings and Valuation

This table compares Sleep Number and Sonos”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sleep Number	$1.34 billion	0.00	-$131.96 million	($7.56)	-0.02
Sonos	$1.44 billion	1.45	-$61.14 million	$0.45	39.33

Sonos has higher revenue and earnings than Sleep Number. Sleep Number is trading at a lower price-to-earnings ratio than Sonos, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Sleep Number and Sonos’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sleep Number	-12.98%	N/A	-16.48%
Sonos	3.82%	19.10%	8.67%

Institutional & Insider Ownership

85.7% of Sleep Number shares are owned by institutional investors. Comparatively, 85.8% of Sonos shares are owned by institutional investors. 3.6% of Sleep Number shares are owned by insiders. Comparatively, 1.3% of Sonos shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

Sonos beats Sleep Number on 11 of the 14 factors compared between the two stocks.

About Sleep Number

Sleep Number Corporation, together with its subsidiaries, offers sleep solutions and services in the United States. The company designs, manufactures, markets, retails, and services beds, pillows, sheets, and other bedding products under the Sleep Number name. It also provides smart adjustable bases under the FlextFit brand, and smart beds under the Climate 360 name. The company sells its products directly to consumers through retail, online, phone, chat, and other. The company was formerly known as Select Comfort Corporation and changed its name to Sleep Number Corporation in November 2017. Sleep Number Corporation was incorporated in 1987 and is headquartered in Minneapolis, Minnesota.

About Sonos

Sonos, Inc., together with its subsidiaries, designs, develops, manufactures, and sells audio products and services in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. It offers wireless, portable, and home theater speakers; components; and accessories. The company offers its products through approximately 10,000 third-party retail stores, including custom installers of home audio systems; and e-commerce retailers, as well as through its website. The company was formerly known as Rincon Audio, Inc. and changed its name to Sonos, Inc. in May 2004. Sonos, Inc. was incorporated in 2002 and is headquartered in Santa Barbara, California.