Subscribers to Motley Fool Hidden Gems, our small-cap value newsletter, are grinning ear to ear today in the wake of an earnings release from one of our earliest and best picks to date: Mine Safety (NYSE:MSA). On Wednesday, the Pittsburgh-based manufacturer of goggles and respirators for mine workers and firemen, gas masks and combat helmets for Homeland Security and the military, reported not only record revenues but also its best earnings quarter ever.

Looking at the numbers for continuing operations in the third quarter, Mine Safety notched a 28% rise in sales and a 72% increase in profits, to $0.50 per diluted share. And in case you're wondering, the "diluted" element in that figure increased just 1% over the past year. Pretty modest, for a company whose stock price has nearly doubled in value over the past 52 weeks.

Year to date, Mine Safety can claim 23% revenue gains and a 54% increase in profit per diluted share over its numbers for the first nine months of 2003. Thus, it would appear that both Mine Safety's revenue and earnings growth are accelerating as the year progresses.

Basically, everything looks to be going fine on the surface at Mine Safety. So let's sink a shaft into the company's numbers, and see if we can bring any deeper problems to light: On the margin front, its net margins from continuing operations (to compare apples to apples, I'm excluding the results for the chemical division it sold off last year) increased from 6.6% to 8.5%, helped by an increase in operating margins from 10.8% to 13.7%. No problems there.

Turning to days sales outstanding (DSO), it's more of the same. The company needed 69 days to convert a sale into cash in the bank last year. The process takes neither more nor less time today.

Actually, the only fault I was able to find in Mine Safety's numbers lay in its "inventory turns" (the number of times the company can sell out its whole inventory of goods, be they raw materials, works in progress, or finished goods). That number dropped from 3.5 times in three quarters, to 3.2 times (the result of a 25% increase in inventories year-on-year). This bears watching, but as mine canaries go, it still looks pretty healthy to me.

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Fool contributor Rich Smith has no beneficial interest in any companies mentioned in this article.