This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

April 9, 2009 - Central Garden & Pet Company (CENT-NASDAQ) operates as marketer and producer of branded products for the lawn and garden, and pet supplies markets. The company's lawn and garden products include grass seed; wild bird feed, bird feeders, bird houses,and other birding accessories; weed, grass, ant and other herbicide, insecticide, and pesticide products; and decorative outdoor lifestyle and lighting products, including pottery, trellises and other wood products, and holiday lighting products.

The company's pet supplies products comprise products for dogs and cats, including edible bones, non-edible chews, dog and cat food and treats, leashes, collars, toys, pet carriers, and grooming supplies; products for birds, small animals, and specialty pets, such as food, cages and habitats, toys, chews, and related accessories; animal and household health, and insect control products; products for fish, reptiles, and other aquarium-based pets comprising aquariums, furniture and lighting fixtures, pumps, filters, water conditioners, food and supplements, and information and knowledge resources; and products for horses and livestock.

Central Garden & Pet sells its pet supplies products under various brand names, including Adams, All-Glass Aquarium, Altosid, Aqueon, BioSpot, Breeder's Choice, Coralife, Farnam, Four Paws, Interpet, Kaytee, Kent Marine, Nylabone, Pet Select, Pre Strike, Oceanic Systems, Super Pet, TFH , Zilla, and Zodiac. It sells to mass merchants, home improvement centers, lawn and garden nurseries, grocery stores, professional end users, specialty pet stores, insect control manufacturers, veterinarians municipalities, farmers, and other animal buyers. The company was founded in 1955 and is based in Walnut Creek, California.

Here's the first thing to know about CENT: in November of last year, the stock traded at $2.17. Now it's up 303% to $8.75, still well below its all-time high of $18.40 set in 2006 (split adjusted pricing for 3 for 1 split in 2007). So this stock can move, up and down.

Earnings reached 94 cents a share in 2006, their highest ever. Then in 2007, they dropped to less than half to 46 cents, then lost another penny in 2008 with the year finishing at 45 cents. This year analysts see the turn. They predict 55 cents, then in 2010, 63 cents. The second quarter results will be out shortly (fiscal year ends in September) and consensus among analysts is for 31 cents a share, up from 28 cents in the same period last year. For the third quarter, they see 25 cents, above the 22 cents of last year's third quarter.

Sales since 2006 increased, going from $1.6215 billion to $1.6711 billion to $1.7054 billion last year. This year, analysts see a small drop to $1.68 billion, then rebounding to $1.72 billion next year. In the December period, sales were down 7% compared to the same quarter last year, but the December quarter is always the slowest one for CENT. Management had tighter inventory control over the period but also customers were cutting back. Of course, lawn and garden activity is always very quiet in the winter.

Profits, however, were not hit as hard since the company initiated cost-cutting programs, showing strong results in the selling, general administrative cost area. Lower working capital needs of almost $50 million also helped the improvement. Even with lower sales and uncertainty about the consumer management has already predicted that 2009 will be a better year than 2008 in terms of profits, reflecting its belief that the cost cutting programs will continue to contribute to net income throughout the year.

The really good news is management's commitment to lowering the debt burden. It's already paid down $111 million over the last year, leaving about $490 million. There's also a credit line available of $145 million in case the company needs cash.

More numbers: Price to Sales is .35 while Price to Book is 1.18. Operating margin for the last 12 months was 5.54% and Profit margin was .95%. Current ratio (current assets divided by current liabilities) is 3. Book Value per share is $7.06. There are 70.32 million shares outstanding and a float of 62.72 million. Insiders own 8.67% of the stock. Institutions own 78%. There is no dividend.

CENT is a stock that has had high volatility. Whether there's more to come is something only time will show. At the current price, it's a bit overvalued unless earnings pop even better than expected, but they could easily slip lower if the recession worsens. In that case, aggressive investors may want to pounce.

- Company Web site: www.central.com

- Ted Allrich