USANA Health Sciences (NASDAQ:USNA), a network marketer of nutritional and personal-care products, will report its first-quarter 2007 financial results on Tuesday.

What analysts say:

  • Buy, sell, or waffle? Sentiment has turned strongly in favor of USANA, with half of the six analysts who follow it recommending the marketer with a buy rating. The other three say hold.
  • Revenues. A background check by analysts has sales expecting to jump almost 16% to $103.8 million.
  • Earnings. Profits, meanwhile should surge 24% to $0.62 per share.

What management says:
While sales and earnings are rising, the stock has been sidetracked by inflated accounts of degrees and awards earned. The company has also been slapped with a class action suit alleging that the company has an unsustainable business model and operates as a pyramid scheme. An informal SEC inquiry began last month.

Trying to get past the distractions over the purported credentials of executives and directors of the firm, USANA says that the last week of the quarter brought the single highest week of sales in the company's history. One week, however, was not enough to prop up sales -- the multilevel marketing firm also had to report revenues would come in below prior guidance, even as earnings were expected to be in line. USANA President David Wentz still called the results "solid."

What management does:
Expenses continue to eat up the profits that USANA is generating from increases in sales. Last quarter, its sales, general, and administrative expenses crept up to 19% of revenues, from 18% the year before. Incentives to associates remain an integral part of compensation for them, but at 39% of revenues, those incentives dig deep into the company's operations. It's been a recurring factor in USANA's performance for some time.

























All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
While distracting, the credentials flap should not deter investors from focusing on the business of USANA Health. It's still growing revenues, though not nearly as quickly as it thought it would, and earnings have in part been propped up by share buybacks. In fact, it announced an additional $40 million expansion of its share-repurchase program just yesterday, bringing it to a total of $65 million. It repurchased about 1 million shares last year at a cost of about $41 million. With its shares now off a little less than 30% from the highs reached just before "degree-gate" unfolded, USANA is now more attractively priced than competitors Avon (NYSE:AVP) and NuSkin (NYSE:NUS), and it's comparably valued to Herbalife (NYSE:HLF).

While there are some valid reasons to be skeptical of the supplement industry, being part of a pyramid scheme doesn't look to be one of them with USANA Health Sciences.

Related Foolishness:

USANA has earned a one-star rating from Motley Fool CAPS, the new investor-intelligence community. You can add your voice to the new stock rating service by joining today. It's free!

Fool contributor Rich Duprey  does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.