Martek Meanders Through the Year

Infant-formula supplement maker Martek Biosciences (Nasdaq: MATK  ) didn't exactly end its fiscal year on a high note.

The company posted a 10% year-over-year increase in revenue in its final quarter of the fiscal year that ended in October. While double-digit growth might sound pretty good in this market, it's considerably slower than the 15% growth in revenue the company saw for the entire year.

Earnings -- adjusted for a non-recurring tax benefit -- came in at $0.27 per share, which is up 17% over the year-ago quarter. Anytime a company can grow earnings faster than revenue, you know it's doing something right.

Even though growth seems to be slowing down, Martek is in a pretty good position. Eighty-nine percent of its revenue comes from its DHA supplement for baby formula, and 80% of those sales are in long-term contracts. One thing's for certain -- babies aren't going to stop eating just because there's a global slowdown in the economy.

Martek has also expanded its DHA into other foods, as well. The supplement, which is supposed to benefit the brain, eyes and heart, is now in wide range of foods, like Kellogg's (NYSE: K  ) health bars, Starbucks' (Nasdaq: SBUX  ) muffins, J.M. Smucker's (NYSE: SJM  ) canola oil, and General Mills' (NYSE: GIS  ) yogurt. It's sales of those types of foods -- as well as straight supplements like Walgreen's (NYSE: WAG  ) Finest Natural, which contains Martek's DHA -- that might suffer should we see a major downturn in the economy. When money's tight, consumers won't be willing to spend extra for the products just because they have a supplement in them.

Martek is trading at about 9 times free cash flow from this fiscal year. That seems like a pretty decent price even if growth slows down, and gives investors a little bit of a cushion should things turn for the worst.