Those new clear nasal strips that are designed to peel off easily -- a major benefit for people with sensitive skin -- made news again today. Breathe Right producer CNS (NASDAQ:CNXS) attributed a 12% quarterly increase (versus the year-ago quarter) in domestic nasal strip sales to the successful launch of the clear strips and an advertising campaign that tells why this "drug-free alternative" is effective.

Overall, CNS's third-quarter sales increased 9%, and net income, excluding a $1.1 million import duty refund, was 2.5 times higher. Helping results, too, was a 28% increase in sales of FiberChoice chewable fiber tablets (although they represent only 10.5% of total sales).

The company plans to continue to offer oversized net income increases. Next quarter, CNS says, it expects earnings to go from last year's $0.02 per share to $0.09 to $0.14. For fiscal 2005, its earnings should rise 25% to 34% -- that's 19 times forward low-end earnings guidance.

CNS, a Motley Fool Hidden Gems newsletter recommendation, is not your typical company. The debt-free king of the nasal strip market has built up a $58.2 million ($3.94-a-share) cash hoard. Although the company pays a nickel quarterly dividend (a 1.6% yield), investors would be wise to realize there is ample cash for share repurchases or acquisitions without sullying the balance sheet with debt.

There is one dark cloud on Breathe Right's horizon: The U.S. Patent Office is reviewing two CNS nasal strip patents. Before running for the hills, remember that deep-pocketed Schering-Plough (NYSE:SGP) tried to strip away a piece of this lucrative market years ago. A younger (and not so rich) CNS sent Schering to the sidelines and out of the market.

Breathe Right dominates its market. From Vapor Strips that incorporate Procter & Gamble's (NYSE:PG) Vicks to today's sensitive-skin model, CNS has proved that it can innovate and expand its product reach. With FiberChoice, the company has shown it can profitably build a new product franchise. While some will see only a company with modest revenue growth but rapidly expanding margins, this analyst sees a small company with the cash to radically change its long-term future.

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Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.