When seeking out "hidden gems," Tom Gardner, co-analyst for the Foolish newsletter of the same name, couldn't have found a more natural fit than utterly un-sexy safety equipment manufacturer Mine Safety (NYSE:MSA). It's also perfectly natural that we'd bring our readers up to speed on the company in plenty of time for tomorrow morning's Q2 2006 earnings report.

What analysts say:

  • Buy, sell, or waffle? Five analysts follow Mine Safety. Four of them rate the stock a hold, and one a buy.
  • Revenues. Analysts collectively expect to see just 2% revenue growth tomorrow. $224.5 million is the target.
  • Earnings. Profits are predicted to climb 6% to $0.55 per share.

What management says:
Last quarter, I took Mine Safety management to task for obfuscating the decline in its sales to the U.S. government by emphasizing instead how well its sales to commercial customers were doing. Also, for continuing to fail to provide cash flow statements with its earnings releases, even when it clearly had the cash flow data in hand. And finally, for resorting to spin when it didn't need to, when it could simply and straightforwardly have owned up to the shift in its revenue streams, but soothed investors' worries by reminding them that it was still producing plenty of excess cash.

What management does:
After all, as the figures below plainly show, Mine Safety's rolling gross margins are once again on the upswing, pulling operating margins right along in their wake. As a result, although gross margins today are a bit lower than they were 18 months ago, both operating and net margins sit higher.

Margins %

9/04

12/04

3/05

6/05

9/05

12/05

Gross

39.9

39.5

39.5

38.8

39.1

39.2

Op.

13.3

13.6

13.3

12.9

13.8

14

Net

8.3

8.6

8.7

8.4

9.0

8.4
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Fool co-founder Tom Gardner, who recommended the stock to our Hidden Gems members, also sees no real problem with Mine Safety's business, and (here's a rarity) agrees with the Wall Street analysts' estimation that Mine Safety can grow its profits at about 15% per annum over the long term. His only real concern with the stock is that its price has grown a bit faster than he thinks is warranted.

Mine Safety was one of Tom's very first picks for Hidden Gems; he initially predicted the stock could double in three years. Mine Safety trades today for well more than twice the price at which Tom originally recommended it -- and the three years aren't even up yet. If you'd like to find more companies that Tom and team expect to climb to similar heights, you're in luck: We're giving away free 30-day trials to the newsletter to the first gazillion people who click this link.

Competitors:

  • Honeywell (NYSE:HON)
  • Lakeland (NASDAQ:LAKE)
  • Abatix (NASDAQ:ABIX)

Customers:

  • Home Depot (NYSE:HD)
  • Airgas (NYSE:ARG)
  • WW Grainger (NYSE:GWW)

Fool contributor Rich Smith does not own shares of any company named above. Home Depot is a Motley Fool Inside Value pick. The Fool has a disclosure policy.