I never thought the sport of metal detecting could be so exciting. You'll be walking along, the alarm will sound, and the suspense of what lies underground can be downright unbearable. And although most of the time those strong signals yield worthless bottle caps or rusty nails, every once in a while you'll uncover a valuable treasure.

The hardest part of metal detecting is finding a jewel in a field littered with trash -- in this case, cosmetics companies.

Companies like Avon (NYSE:AVP), Estee Lauder (NYSE:EL), Nu Skin (NYSE:NUS), and Elizabeth Arden (NASDAQ:RDEN) have been trading near year lows after reporting lackluster sales and higher costs. But with all the turmoil, are there any hidden jewels left undiscovered? I believe the answer is "yes," because I certainly think Inter Parfums (NASDAQ:IPAR) is worth exploring.

Inter Parfums is a smaller personal care company specializing in developing and distributing prestige perfumes and cosmetics with popular licensed brands, such as Burberry, Paul Smith London, Celine, and Arpege by Lanvin. Inter Parfums also mass markets less expensive products, such as designer fragrances, skin creams, deodorants, and body sprays, to a variety of stores, including Wal-Mart (NYSE:WMT) and Dollar General (NYSE:DG). But with the industry in a downturn, is Inter Parfum sending the right signals?

Strong signals
Recently, Inter Parfums announced a 12% increase in net sales for the third quarter over the comparable period a year ago -- a 21% increase for the first nine months. Gross margins improved, increasing 656 basis points for the quarter. The company reaffirmed 2005 sales guidance of $274 million -- a 17% increase from 2004.

Other shiny bits include the company's increasing dividends over the past four years and the fact that institutional ownership is less than 25%, while management owns more than 50% of the stock. In addition, Inter Parfums has been growing, delivering a compound annual growth rate of 22% for the past five years, with revenues and operating income both doubling over the past four years.

Weak signals
But luxury can have its downfalls, usually found in the form of licensing and royalties -- linking a name or brand to a product can be quite expensive. SG&A expenses for the quarter were 47% of sales, a 9% increase over last year. Royalties for the first nine months increased 76% over last year, with marketing and advertising costs almost doubling during the same time frame. In addition, Inter Parfums' mass-market sales declined 11% during the quarter.

Foolish final words: I encourage investors to do a little more digging. But if Inter Parfum's luxury products continue to magnetize consumers, this little small cap could be shining brightly in the future.

Fragrant or foul? Find out below:

Fool contributor M.D. Mitchell is down the street at the local junkyard looking for some good trash. He suggests using caution while wearing perfumes, as the right fragrance may attract bulls. He owns none of the companies mentioned here.