Nutraceutical International (NUTR) is a leading manufacturer of vitamins, minerals, and other nutritional supplements. Through brand names such as Au Naturel, Solaray, Action Labs, and Natural Balance, the company distributes more than 3,000 products to specialty retailers around the world. Additionally, the firm publishes a line of natural health books under the Woodland Publishing name.

Nutraceutical is one of those unique companies that possess both growth and value attributes. The stock was a highflier in 2001 and 2002, posting back-to-back triple-digit percentage returns. However, the shares have cooled off in recent years, and they are currently trading about 50% below their five-year peak of $27.62. Despite the pullback, shares of NUTR have managed to deliver impressive average annual gains of +41.7% over the past five years.

Even though the stock has rallied in recent years, NUTR is still trading at a sharp discount to its industry rivals:

Over the last several years, the company has seen its revenues rise at a healthy double-digit annual clip. Furthermore, gross margins have held steady, edging up from 49.6% in 2001 to 51.6% today -- despite increased competition. Unfortunately, bottom-line growth has been a little tougher to come by over that period. The firm has jumped out to a fast start in fiscal 2006, though, with first-quarter earnings climbing +25% to $0.30 per share.

Over the last few years, management has done an excellent job of maintaining a solid balance sheet, and dilution has been almost non-existent. There are fewer shares outstanding today (11 million) than there were in 2000, and nearly three-fourths are held by institutional owners. Fidelity, Royce, and American Century all have a major stake in the company.

I am also encouraged by the firm's improved asset turnover rate, which has climbed from 1.0 to 1.5 over the past five years. The latest reading is double the industry average of 0.75, and it tells me that management is doing a better job of efficiently deploying the company's assets.

Over the past year, the company has generated more than $20 million of operating cash flow. Management has judiciously used that money to buy property and equipment ($6.8 million), complete several key acquisitions ($5.8 million), pay down debt ($4.5 million) and fund a share repurchase program ($3.1 million.)

While growth rates in the nutritional supplement market have been soft, Nutraceutical has relied heavily on acquisitions to spur growth. Going forward, I expect the firm to continue its buying spree. However, management is also exploring ways to pick up market share and improve organic growth. At the same time, the consolidation of manufacturing operations should help cut costs and improve profitability.

As always, I wouldn't advise a concentrated position in shares of any single firm. However, those looking for ways to energize a core value portfolio might find this vitamin maker is just what the doctor ordered.

-----------------------------

Important Note: The above article was merely a small excerpt from a recent issue we sent to subscribers of our premium value investing service -- Half-Priced Stocks. The mission of Half-Priced Stocks is to help our readers identify securities that are trading at the steepest discount to their intrinsic net worth. In some cases this discount can reach up to 50% or more, giving savvy value investors the chance to purchase quality stocks for just pennies on the dollar. To receive your copy of our most recent issue of Half-Priced Stocks, as well as other guidance similar to this twice per month, you'll need to subscribe to this publication. To learn more, please visit:
https://www.streetauthority.com/subscribe-hps.asp

Thanks for reading!

Income Security of the Month Our "Income Security of the Month" for July 2008 invests in a fast-growing overseas market that doesn't get much exposure in the mainstream financial press. And although it typically makes enormous annual dividend payments -- it has paid an average dividend of 24.9% per year over the past five years -- this fund is perhaps most appealing for its total return potential. Specifically, the fund has delivered total returns of +263.9% since 2003, and it ranks in the top 10% of its category over the past decade.

Top 10 Stocks for 2008! Since we began publishing this report back in 2003, the picks we've featured have consistently beaten the broader market -- delivering average gains of +21.3% per year and outperforming the S&P by a nearly 2-to-1 margin. Act now to reserve your copy of our newest report -- Top Ten Stocks for 2008.

 

Success Trading -- 365 Days Without a Loss Success Trading Group scored 52 wins in 52 weeks! Get their weekend newsletters free.  High-Yield Investing If you're looking for both high yields and enormous capital gains, then you need to learn more about our "Income Stock of the Month."	Stephen Leeb's Market Forecast Receive a free ongoing, PhD level Wall Street education in how the markets work so that you can see into the future and position yourself accordingly. Investor's Business Daily (IBD) Get 10 Free Issues of Investor's Business Daily (IBD) – Plus 2 Free Weeks of Investors.com