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.

February 12, 2009 - FGX International Holdings (FGXI-NASDAQ) through its subsidiary, FGX International, Inc. engages in the design and marketing of non-prescription reading glasses, sunglasses, and costume jewelry in North America and the United Kingdom. The company markets its products under the FosterGrant, Magnivision, Anarchy, Angel, Gargoyles, Hyperflexx, and Redi-Readers trademarks.

There's one thing you need to know right up front: 75% of the balance sheet is debt, a total of $105 million with $81.7 million in long term. That's fine for now since interest rates are low. But there's a question of whether that short term portion of the debt can be refinanced, if necessary, no matter what the interest rates are. And that's not a reflection on FGX's ability to pay; it's a comment on the credit market in general. While Cisco can borrow money at great rates, it's not clear all companies have equal access to credit markets and at what rates. Having waved the red flag up front, here's more about the company.

Earnings have been exceptional since FGX went public, showing 29 cents in 2007 (first full year of trading). 2008 should have finished with 78 cents. Projections for 2009 are still limited, but for the first 2 quarters anlaysts predict 45 cents, up from 29 cents for the first 2 quarters of last year. Jefferies initiated coverage on the stock at a Buy recommendation on September 5, 2008. Northland Securities initiated coverage of the stock on November 25, 2008 at an Outperform rating. Three other firms, regional brokers, all have the stock at a Buy rating.

Sales have also gained traction, going from $209 million in 2006, then $240.5 million in 2007, and a projected total of $255 million for 2008. Raquel Welch just signed on to endorse Foster Grant sunglasses so that may make 2009 sales jump. Furthermore, the company is expanding internationally with offices in New York, Toronto, Stoke-On-Trent, England, Mexico City, and Shenzhen, China.

Some numbers stand out, beside the amount of debt. The good ones are: Return on Equity for 2007 was 27.2%. There are $99 million in current assets and $65 million in current liabilities.

There are 21.17 million shares outstanding with a float of 13.64 million. Insiders own 35.73%. The beta is 1.32. The high for the stock in the last 52 weeks was on April 28, 2008 at $14.47. The low was on July 1, 2008 at $7.37. Operating margin for the last 12 months was 13.31% and the Profit margin was 4.55%. Price to book is 9.35.

Aggressive investors should take careful note of the debt, then decide if there's a comfort level with that. There's no question earnings are ramping. How much the recession will affect eyeglass sales is yet to be determined. Sunglasses would seem to be vulnerable but reading glasses aren't discretionary. Some would argue, especially in certain circles, that sunglasses aren't either.

This stock is off to a decent start, having only traded for a little over a year. The brokerage firms following the stock all like it, with recommendations to buy. But some of those are over a year old and haven't been updated. In today's environment, certainly some would change their recommendations. Still, this is a small and growing company, with good earnings, growing earnings. As long as the debt doesn't become onerous, and can be refinanced if necessary, and consumers still want to read and protect their eyes, the stock should do well.

Company Web site: www.fgxi.com

- Ted Allrich