There was a time when the low-carbohydrate Atkins and South Beach diets were sending tsunamis through the financial world. Riding swelling demand up was MGP Ingredients (NASDAQ:MGPI) -- formerly known as Midwest Grain Products (as unlikely a low-carb name as there is).

MGP hit the big time with FiberStar 70, a wheat-based resistant starch that enabled food manufacturers to lower the carbohydrate levels of their products. It was followed by FiberStar 80, which added a potato-based variety to the product line through a licensing agreement with Penford (NASDAQ:PENX).

From a March 2003 closing low of $3.08, the stock crested at $22.87 in May 2004 before falling 23% today to $7.54 a share. In surfing terms, the last six months have been over the falls and a wipeout.

Pounding the stock into the sand today was a company press release that lowered guidance for fiscal year 2005 (which ends June 30, 2005) from $1.03-$1.08 a share to $0.40 to $0.50 a share. Bummer, dude! Making matters worse is that the revised guidance does not account for any previous purchase agreements with Penford.

Those looking for a wave of future good news should heed the company's words that "future demand for low-carb products should not be expected to return to the much higher levels experienced during the fourth quarter."

While the low-carb diet craze was a rising tide for protein (that is meat) king Tyson Foods (NYSE:TSN), it also had a positive impact on small-cap food companies. Nut purveyor John B. Sanfilippo & Son (NASDAQ:JBSS) rose 4.5 times in five months, and egg king Cal-Maine Foods (NASDAQ:CALM) rose almost 14 times in 10 months.

While companies such as Cal-Maine used the boom cycle to clean up its balance sheet, MGP has gone from net cash (cash minus debt) of $2.3 million in 2003 to a net debt (debt minus cash) of $24.4 million today. With potential problems still looming from the Penford deal, it is hardly time for investors to wade into MGP Ingredients -- especially at 19 times earnings (the low end of guidance).

Investors looking for food investments should consider fallen micro-caps with strong balance sheets that are selling at reasonable forward earnings levels. They should also consider giants such as General Mills (NYSE:GIS) and Kraft Foods (NYSE:KFT), which could never catch the earnings wave during the low-carb fad. Changing diets could certainly boost their results.

Fool contributor W.D. Crotty does not own stock in any of the companies mentioned and, if you have not guessed, spent a lot of time enjoying the surf while living in Southern California.