Personal care and housewares distributor Helen of Troy (NASDAQ:HELE) still isn't looking too pretty, but sometimes you have to go beneath the surface and find the inner beauty. While there are still plenty of valid reasons to be suspicious about this company, Fools would do well to remember that turnarounds, like roses, don't generally bloom from the sweetest-smelling earth.

For the company's third quarter, sales once again fell -- this time by 4% relative to last year's tally. Personal care product sales (that is, stuff like hair dryers, deodorants, and skin-care products) fell more than 8%, while housewares sales climbed nearly 21%. Once again, though, margins eroded, and operating income fell by one-third and net earnings dropped by about 27%.

And, gee, the news just keeps getting better. Inventories rose almost 33%, and Helen of Troy issued guidance for the next quarter that looks to be a fair bit below the currently published average estimate.

So why give this company the time of day? After all, didn't I rail against what I feel is excessive compensation for the CEO not that long ago? Well, although I'm not a fan of the pay package, I do believe there could be some light at the end of the tunnel here.

I'm a fan of using structural free cash flow for analysis and valuation, and troubled though Helen of Troy may be, present valuations aren't assuming much in the way of growth. In fact, running my own numbers, I get a fair value of about $15, with ZERO future growth in cash flow. So while I do think management has some challenges, I think the potential of the new distribution center, the stabilization of the personal care business, and the future growth of the OXO kitchenware business is being largely ignored.

I'm not buying these shares today and I'm not suggesting that you should, either. Quite frankly, there are retailers like Wal-Mart (NYSE:WMT) and large partial competitors like Procter &Gamble (NYSE:PG), Alberto-Culver (NYSE:ACV), and Unilever (NYSE:UN) (NYSE:UL) that all have their own charms and perhaps better prospects.

What I'm saying, though, is that every once in a while, even below-average companies get knocked down to prices where the odds turn toward the long- term investor's favor. Due diligence is very important in these cases, though, as sometimes that light at the end of the tunnel is another oncoming train.

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Unilever is a Motley Fool Income Investor recommendation.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).