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.

May 14, 2010 - The Finish Line, Inc. (FINL-NASDAQ) together with its subsidiaries, operates as a mall-based specialty retailer in the United States. It sells men's, women's, and children's athletic and lifestyle apparel, and outdoor footwear under the Finish Line brand name. The company also sells merchandise through its Web site www.finishline.com, as well as through catalogs.

Things are improving at Finish Line. So is the stock, having hit a low of $1.50 at the beginning of 2008, rallying to $12.40, then dropping to $3.80 by early 2009. Since then, it's been up, up, and away. The stock recently reached $18.10. Can it keep going?

The company just released its fiscal 2010 annual report (fiscal year ends in February). Here are some of the highlights:

In fiscal 2010, the Company experienced improved results in virtually all facets of the business. The Company was able to execute its strategy of maintaining a premium retail position while improving profitability and increasing cash flow, strengthening the balance sheet and delivering shareholder value despite an environment when consumers remained cautious and traffic in stores declined from the prior year. In July 2009, it sold the Man Alive chain which had been affecting operating results negatively. In selling Man Alive, it allowed the Company to focus on the core Finish Line business and improve operating results. Fiscal 2010 highlights from continuing operations were:

- Net sales decreased 1.9% to $1,172.4 million in fiscal 2010 compared to $1,194.7 million in fiscal 2009

- Comparable store net sales for fiscal 2010 were negative 0.5%. This consisted of a first half of the year with a negative 7.2% comparable store net sales and a second half of the year that had a positive 6.6% comparable store net sales.

- Internet sales (which are included in comparable store net sales) increased by 21.3%

- Average dollar per transaction increased approximately 4%

- Store traffic decreased approximately 7%

- 1.1% increase in product margin as a percentage of net sales

- Fiscal 2010 product margin percentage was an historical high

- Occupancy costs lowered by 0.4% as a percentage of net sales

- Occupancy costs in dollars decreased by 4.8% in fiscal 2010 from fiscal 2009

- SG&A expenses were $297.3 million (25.4% of net sales) in fiscal 2010 compared to $312.0 million (26.1% of net sales) in fiscal 2009

- Operating income was $72.1 million (6.1% of net sales) in fiscal 2010 compared to $49.9 million (4.2% of net sales) in fiscal 2009

- Income from continuing operations was $50.8 million (4.3% of net sales) in fiscal 2010 compared to $30.4 million (2.5% of net sales) in fiscal 2009

- Diluted income from continuing operations per share of $0.92 in fiscal 2010 compared to $0.55 in fiscal 2009

- Cash and cash equivalents were $234.5 million at February 27, 2010 with no interest bearing debt

- Generated cash from operations of $157.5 million in fiscal 2010

- Capital expenditures were reduced to $8.5 million in fiscal 2010 from $14.7 million in fiscal 2009 due to slowing our store growth and controlling all other capital expenditures

- Paid $6.6 million of dividends to shareholders in fiscal 2010

- Purchased $15.9 million of treasury stock during fiscal 2010

- Opened five new stores and closed 28 during fiscal 2010, ending the year with 666

In summary: this company tightened its belt in 2010, paid a dividend of 12 cents a share, bought back almost $16 million in stock, has no debt, and saw an increase in revenues in the second half of the year.

Inventory control has been one of the factors contributing to the recent success as well as better cost containment. That means even if revenues remain flat or go a little lower, the bottom line should keep growing. In fact, 12 analysts have a consensus estimate of $1.11 for 2011 vs the 85 cents for 2010, then $1.21 for 2012. Next earnings report will be on June 24 for the first quarter. Look for 14 cents a share, well above the 3 cents earned last year in the first period. For the second quarter, expect 33 cents a share, an improvement over the 21 cents of last year's second.

Prices for sneakers are heading higher. Nike is setting the pace (and seeing the highest demand) with lighter models like Lunar Glide and Air Max. New offerings from Reebok like ZigTech are moving well along with Puma shoes. The newest trend: shoes that tone your whole body, ones like Skechers' latest: Shape Ups. Other manufacturers will certainly get in on this trend.

Apparel is also selling better. FINL carries brands such as The North Face, Under Armour and Nike's LiveStrong. These manufacturers have moved into every day wear, expanding their lines from athletic togs.

More numbers: Trailing P/E is 14. Price to sales ratio is .77. Price to book is 2.00. Book value is $8.32. For the last 12 months, Operating margin was 6.96% and Profit margin was 3.4%. Return on assets was 8.43% and Return on equity was 11.73%. Revenues were $1.17 billion
Total cash is $234.51 million which is $4.31 a share. There is no debt. Current ratio is 3.86. Beta is 1.76. There are 54.36 million shares outstanding with a Float of 50.15 million. Insiders own 1.26% while Institutions have 90.90%. The annual dividend will be 16 cents for 2011 for a yield of 1%.

Aggressive investors should like this story. Investors in general have liked it for the last year as the stock took off from its low and almost reached its all-time high of $23.40, set in 2005. Valuations are getting a little high but with such a strong balance sheet and decent growth expected, that's not a surprise. Dig deeper into this one.

- Company Web site: www.finishline.com

- Ted Allrich