The world of nutritional supplements is a rather competitive one. However, for companies that can prove their worth it can be extremely rewarding. This was proven the other day when shares of Vitamin Shoppe (VSI) rose nearly 12% on news that it exceeded analyst expectations with earnings per share of $0.53, compared to the $0.52 that Mr. Market expected. Certainly, this is good news for the company and its shareholders. What does it mean for these parties moving forward, as well as for competitors like GNC Holdings (GNC)?

Size matters
In the world of retail, whether it be for clothing or nutritional supplements, size is a very important factor. For instance, Vitamin Shoppe, with 640 locations and quarterly revenue of $272.5 million, is far smaller than GNC with around 8,400 locations and quarterly revenue of $675.6 million, as of these companies' latest earnings releases.

While this size difference is nice for a company like GNC, it does serve as a double-edged sword. The underlying rationale is that with a larger market footprint, it becomes more difficult to grow than it was in the past. Perhaps the best illustration of this phenomenon can be seen when you compare the revenue and net income growth of these two companies against one another.

Over the past five years, GNC grew its revenue, in aggregate, by 46.7% from $1.66 billion in 2008 to $2.43 billion by the end of fiscal year 2012. Although such a high growth rate is attractive for a company coming out of a recession, it is still smaller than the 58.1% growth rate achieved by Vitamin Shoppe. Between 2008 and 2012, Vitamin Shoppe saw its revenue increase from $601.5 million to $950.9 million as customers moved more toward living healthier lifestyles.

This same issue for GNC can be seen on its bottom line. From 2008 to 2012, the company saw its net income rise by 339.1% from $54.7 million to $240.2 million. This is very strong growth by most any investor's standards, but it pales in comparison to the growth achieved by Vitamin Shoppe. Over the same time period, the company saw its net income rise by a whopping 641.5% from $8.2 million to $60.8 million due in part to improved economies of scale and because it had a smaller base than GNC from which to start.

Profitability isn't the only necessary proxy for health!
As important as profitability is for a company, it would be foolish (not Foolish) to rely on this as the only factor in figuring out if an investment is right for you. Putting aside the idea of profitability for a minute, it might be a wise idea to look at the company's balance sheet to determine if there is a risk of insolvency or illiquidity in the near-term or long-term.

Of particular interest here should be the current ratio of each company. With a current ratio of 3.03, GNC is slightly better off than its smaller peer at 2.85. What this means is that for every dollar in liabilities due in GNC's current accounting cycle, it has $3.03 in assets that it believes can be converted into cash over said time. As a rule of thumb, the higher the ratio is, the better. However, when you have two ratios this high (I consider a current ratio of at least two to be strong), then the difference doesn't really have a significant impact.

On top of a company's current ratio, we should also account for its long-term debt. By taking the long-term debt/equity ratio of each company, we find that GNC falls behind Vitamin Shoppe with a ratio of 1.30 compared to Vitamin Shoppe's 0. This means that for every dollar in assets that GNC has after removing all liabilities from the equation, it has $1.30 in long-term debt. Though not a disastrous level by any means, this is something an investor in GNC should keep a watchful eye on as a significant increase in this ratio over time may indicate solvency concerns.

Business strategy is always important
Aside from corporate fundamentals, another aspect of a company that the Foolish investor should keep track of is strategic partnerships or other means of growth. Currently, both companies are growing organically, but they are also implementing very specific strategies to complement this growth.

For instance, earlier this year Vitamin Shoppe acquired Super Supplements, a smaller competitor, for $50.3 million. Following the sale, the company has been accretive to revenue, effectively adding $17 million in revenue to Vitamin Shoppe's top line over the past quarter alone. Certainly, acquisitions can be a good way to grow a business. However, as the company in question grows larger and larger this way, it may become heavily loaded up on goodwill, which can welcome impairments if business falters.

Like Vitamin Shoppe, GNC also grows organically. It has been doing so, in part, through a partnership with Rite Aid as well. In accordance with the terms of the partnership, which dates back to 1998, GNC has been allowed to open up a store-within-a-store inside 2,186 Rite Aid locations.

Over the past few years, this strategy has significantly increased GNC's store count. However, it has come at the steep cost of GNC only netting 2.5% of its sales from 26.7% of its stores. Despite this shortcoming, the company has decided to press forward with additional openings under Rite Aid's roof, a decision that is expected to increase its store-within-a-store count to 2,268 locations by the end of 2014.

Foolish takeaway
As we can see in this analysis, GNC is the larger of the two companies. However, it appears to be sub-par when placed next to Vitamin Shoppe. In essence, we have the stand-alone Vitamin Shoppe with attractive growth in one hand, and GNC which appears to be focusing on store growth at all costs, even at the cost of lower revenue per store and a market presence that is vulnerable to the fate of Rite Aid.