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Sleep Country Canada Holdings Inc. has prompted very different reactions with its past two quarterly financial reports, suggesting that investors aren't quite sure what to make of the mattress retailer.

After Sleep Country released its third-quarter financial results in November, the shares plunged 13 per cent in one day, amid concerns about slowing growth, missed profit targets and rising costs.

But last Friday, after the company released its fourth-quarter results, the opposite reaction unfolded: The shares jumped more than 15 per cent, driven by better-than-expected profit and a strong gain in market share.

Feeling whipsawed? Then take Friday's rally as a clear indication that Sleep Country is riding a wave of momentum that is unlikely to falter any time soon.

To be sure, the mattress business is odd. Pricing is opaque and comparing products is difficult for most consumers. The shopping experience – in a showroom, perhaps wearing a parka, making a snap decision on where you're going to be sleeping for the next 10-or-so years – is anything but relaxing.

Entrepreneurial startups, sensing an opportunity to disrupt the traditional business model, have begun to offer online sales, allowing consumers to bypass the showroom experience. These companies will ship a foam mattress-in-a-box to you, with compelling money-back guarantees.

But despite worries, Sleep Country has been demonstrating over the past year that this emerging competition remains a distant threat, if at all.

Yes, it offers its own online mattress-in-a-box as a way to meet the competition head-on. But more important, Sleep Country is demonstrating something remarkable about the mattress industry: Even as other traditional retailers falter, its business is getting stronger.

In last week's fourth-quarter results, Sleep Country reported a profit of 42 cents a share, after adjustments. That was well ahead of the consensus expectation among analysts for a profit of 33 cents a share.

Profit margins also rose – to 16.7 per cent, relative to EBITDA (or earnings before interest, taxes, depreciation and amortization). That's up from a profit margin of 14.1 per cent in the fourth quarter of 2016.

Best of all, sales at stores open for at least one year rose more than 9 per cent, continuing a winning streak. Rising same-store sales, in a market that tends to grow slowly even when the economy is expanding and home sales are strong, means that Sleep Country is capturing market share.

Analysts at Raymond James estimate that the company commands about 35 per cent of the market in Canada, giving it visibility and operating efficiencies.

As CIBC World Markets pointed out, Sleep Country's impressive fourth-quarter results coincided with the wind-down of Sears Canada, which closed its last store in January. This deeply promotional competitor won't be a factor in 2018.

With margins, profit, sales and market share all moving higher, investors should recognize that Sleep Country looks like an attractive opportunity given the upbeat outlook.

For one thing, the current price of $36.25 is still 14 per cent below its high last summer, implying the shares have more room to recover as sentiment improves. And while the stock's trailing price-to-earnings ratio of 23 might look lofty, that's merely in line with its average valuation over the past 18 months, according to Bloomberg.

Analysts at CIBC World Markets expect Sleep Country will report a profit of $1.83 a share in 2018, up more than 12 per cent from 2017. If they're right, their target pushes the stock's estimated P/E ratio below 20.

Analysts at Raymond James are more cautious on Sleep Country because of recent changes to Canadian mortgage regulations (mortgages and mattress sales tend to go together): Their target price of $38 implies a gain of just 5 per cent over the next 12 months (CIBC's target is $43). Nonetheless, Raymond James analysts are upbeat about profit in 2018, with an estimate of $1.84 a share.

If the housing market holds up, Sleep Country's fourth-quarter performance should provide a glimpse at what's coming.