"Under the Radar" uncovers little-known companies worthy of investors' consideration. Check in at 5 every morning to find out about stocks that tend to beat their bigger brethren. 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.
Nu Skin pays a bigger dividend and is better-managed than brand-name peers Revlon ( REV) and Estee Lauder ( EL). Those two competitors fell into losses during the recession. Nu Skin's products are much more expensive, lending them a premium aura and limiting the trade-down effect among consumers. Its Anti-Aging Skin Therapy System fetches $236 and its Tri-Phasic White Radiance Mask goes for $71.73. A $236 skin care regime has few comparable substitutes. The balance sheet holds $160 million of cash and $175 million of debt. A quick ratio of 1 demonstrates adequate liquidity and a debt-to-equity ratio of 0.5 indicates conservative leverage. We give Nu Skin a financial-strength score of 7.9 out of 10, higher than the "buy"-list average of 7.1. The stock has surged 164% this year, but remains attractively priced. At 4.9 times book value and 1.4 times sales per share, Nu Skin is cheaper than its peers. On Nov. 17, management raised its fourth quarter and fiscal 2010 guidance. Nu Skin now expects 2010 earnings per share between $1.60 and $1.70. Assuming it can hit the low end of its earnings target, the stock has a 2010 earnings multiple of 17, which is in Goldilocks territory -- neither cheap, nor expensive. Considering the company's record of growth and stock performance, we rate Nu Skin "buy." -- Reported by Jake Lynch in Boston.