Collins, Parker, & Moroney: Nutritionally...

04/18/2003 12:00 am EST


Jim Collins

Chairman and CEO, Insight Capital Research & Management, Inc.

"USANA (USNA NASDAQ) develops and manufactures high quality nutritional products. The stock is the latest buy recommendation from Jim Collins' OTC Insight. "The company makes weight management products, and employs 459 people at its headquarters in Salt Lake City. Its three primary lines are USANA Nutritionals, Sense, and LEAN Lifelong. The nutritional products include antioxidants, minerals, vitamins, and other nutritional supplements. Its products are designed to provide optimal absorption, bio-availability, and efficacy. The Sense line is designed scientifically as natural products to support healthy skin and hair. The LEAN Lifelong line was developed to provide an approach to weight management, proper diet, and healthy living.

"The company distributes its products through a network marketing system using independent distributors that are referred to as associates. As of year-end 2002, the firm has 66,000 active associates. The firm also sells products directly to preferred customers who purchase products for personal use and are not permitted to resell or distribute the products.

"The firm recently announced that it expects first quarter sales and earnings per share to exceed prior guidance from the company. It continues to see sales increases in each of their market and expects that year-over-year sales growth for the first quarter will exceed 40%, reaching record levels. For the quarter ended December 31, 2002, the firm reported earnings of $0.32 a share, a 357% increase over the prior year. Revenues increased 33% to $38 million. Technically, the stock hit a high in January at $17.83. After dipping to $14.26 in February, the stock has rallied to new highs above $19."

"Meanwhile, NBTY (NBTY NASDAQ) is a leading retailer of nutritional supplements," according to Richard Moroney, editor of Dow Theory Forecasts. "The company operates a wholesale unit (30% of annual sales); Holland and Barrett, a 468-store vitamin chain in the United Kingdom and Ireland (30%); Vitamin World , a 542-store US chain (21%); and a mail-order business (19%). The company, which manufactures roughly 90% of its supplements, commands industry-leading margins. Strong top-line growth has allowed NBTY to notch market share gains. Despite a difficult retail environment, NBTY has been able to grow sales at a 13% annualized rate over the last three years, while also improving its balance sheet. NBTY has made a habit of beating earnings estimates. December-quarter profits topped the consensus estimate by 9%- the eighth consecutive positive earnings surprise. Wall Street expects 17% profit growth in fiscal 2003, ending September. The stock was just upgraded to our focus buy list."

Meanwhile, NBTY is also an on going recommendation from UnDiscovered Stocks. Says editor Sharon Parker, "NBTY announced the acquisition of Health and Diet Group and FSC Wholesale. This gives the firm another 49 GNC stores in the UK and seven in Germany. The FSC wholesale operations gives NBTY a wholesale European acquisition and distribution network, with a ready-made client base. The combined package cost only $12 million- a bargain considering the acquired operations pulled in total sales of $57 million in 2002. The stock is up about 20% since we first recommended the stock and we believe more gains are on the way."

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