This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

December 31, 2009 - Bare Escentuals, Inc. (BARE-NASDAQ) together with its subsidiaries, engages in the development, marketing, and sale of cosmetics, and skin care and body care products under bareMinerals, RareMinerals, Buxom, and md formulations brands worldwide.

Its skin care products include facial cleanser, facial mist, moisturizer, night time skin treatment, and acne treatment products. In addition, the company retails cleansers, corrective treatments, antioxidant moisturizers and sun protectors, as well as a line of professional-use-only products for use by aestheticians, such as glycolic peels.

It markets through premium wholesale customers, company-owned boutiques, spas and salons, home shopping television, infomercials, online shopping, and international distributors. The company was formerly known as STB Beauty, Inc. and changed its name to Bare Escentuals, Inc. in February 2006. Bare Escentuals, Inc. was founded in 1976 and is headquartered in San Francisco, California.

This stock peaked at $43.20 in 2007, shortly after it went public. After the high, the decline didn't stop until March of this year when the price hit $2.45. The stock bounced back and is now trading above $12 a share. The interesting part is that earnings didn't drop that much, and they look like they're set to head higher. Can the stock expect the same?

Earnings were 65 cents a share in 2006, then went to 95 cents in 2007, followed by $1.05 last year. This year, consensus from 10 analysts is for 89 cents a share, then 96 cents next year. Third quarter results were impressive: sales were right in line with expectations at $135 million, but earnings were ahead by 14% at 24 cents vs 21 cents as the estimate. In March of this year, earnings beat the analysts' guesses by 28.6%. In fact, for the last 4 quarters, earnings were ahead of estimates with a range of 5% to 28.6%.

Fourth quarter may not hold any positive surprises and most likely will come in as expected at 26 cents a share, the same as last year's fourth. Consumers are still reeling from economic reality. They're not likely to have spent noticably more on cosmetics this year than they did last. Sales estimate is for $152.4 million, up 3.6% from last year's $147.09 million. For the full year, look for $544.59 million, down 2.1% from the $556.17 million of 2008. Next year, 9 analysts have a consensus estimate of $574.34 million, a gain of 5.5%.

New products are coming in 2010. A new mascara from the Buxom division and 100% natural lip gloss are already in the market and doing well. Look for more offerings to help expand the company's product lines as well as improve the bottom line.

Financially, the company is in good shape with almost $100 million in cash. Debt is $213.5 million. Current ratio is 4.65. There is no dividend. The interest on the debt is covered 10.7 times by earnings. The company is in good shape for funding Research and Development as well as any acquisitions. Further, it could bolster marketing efforts in each of its current markets: the U.S., Europe, Asia and Australia. The company has already spent quite a bit establishing the brand abroad which has hurt results, but those efforts should start paying dividends next year.

More numbers: The company went public in 2006. Forward P/E is 13. Price to sales is 2.12. Price to book is 17.36. Book value is $ .72. Operating margin was 27.58 in the last 12 months. Profit margin was 15.51%. Return on equity was a remarkable 85%. Beta was a noteworthy 2.85. Shares outstanding are 92.02 million with a Float of 71.89 million. Insiders own 30.5% of the stock. Institutions hold 61.70%.

Aggressive investors will find this story of interest. This stock has plenty of good going for it. With new products and strategic initiatives to improve the top and bottom lines, earnings should continue to grow for many years.

- Company Web site: www.bareescentuals.com

 Ted Allrich