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Playing Into Vanity: Under the Radar

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BOSTON (TheStreet) -- Modernity is synonymous with vanity.

The status-anxious consumer will shell out for aesthetic upgrades, and investors can capitalize on the trend. Nu Skin Enterprises (NUS) is a small-cap skin-care specialist that offers international exposure and consistent growth. Its focus on anti-aging and weight-loss products is both savvy and lucrative. But with a $1.7 billion market value, Nu Skin is a personal-products stock off the beaten trail.

The company's third-quarter net income surged 53% to $26 million, and earnings per share rocketed 54% to 40 cents. Revenue increased 8% to $334 million. Nu Skin's operating margin widened from 10% to 12%, helped by lower selling and administrative expenses. A $12 million restructuring charge hurt the bottom line.

Nu Skin derives most of its revenue from North Asia, which includes Japan and South Korea. During the third quarter, revenue in that region declined 1% to $438 million. Greater China revenue also decreased, falling 2% to $155 million. But revenue in the Americas ascended 10% to $181 million, and Europe revenue rose 11% to $93 million. The South Asia/Pacific region registered a 4% jump to $85 million.

During the past three years, revenue grew 4% annually, on average, as earnings per share advanced 37% a year. Return on equity, a key measure of profitability, rose from 18% to 25% in the third quarter, beating the 3% average of S&P 500 Index member companies, but trailing the personal-products industry average of 34%. Nu Skin has paid dividends since 2001 and currently offers a 1.7% yield, less than the 2.8% average of S&P 500 components.

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