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 24, 2009 - Smart Balance, Inc. (SMBL-NASDAQ) distributes various food products in the United States and internationally. Its products, under the Smart Balance brand, include buttery spreads and butter blend sticks, omega peanut butter, omega cooking oil, cooking sprays and shortening, omega plus light mayonnaise, popcorn, cheese, cream cheese, and milk.

Smart Balance is all about heart healthy and low-fat foods. You know, the kind of food that everyone's talking about, that they should be eating. Evidently many are. Sales went from $111 million in 2007 to $221.9 million in 2008. Analysts expect this year to ring up $264.38 million and $326 million in 2010.

On the earnings side, there was a loss of $2.27 a share in 2007, then a loss of 11 cents last year. This year, analysts see a positive 12 cents, then 30 cents next year. Over the next 5 years, analysts predict earnings will grow at an annual average of 33%. On May 7, the company will have a live audio webcast (www.smartbalance.com) at 9:30 EDT to discuss 2009 first-quarter financial results which will be released an hour earlier.

The company went public in late 2007. The stock moved from $13.50 to a low of $4.56 in a year, following the market. It has wide ranges in short periods. It went from $4.58 to $8.00 in 6 weeks last year. Then went from $8.00 to $5.42 in the next 8 weeks. Seat belt required.

SMBL had its fourth quarter report in February. It posted a narrower loss in the fourth period as the company raised prices and eliminated some expenses related to its ramp up of operations in the prior year. For the quarter ended Dec. 31, 2008, it booked a loss of$2.6 million, or 4 cents per share, compared with a loss of $43.8million, or $1.27 per share, in the prior year.

Smart Balance noted that results in the quarter included $5.9 million in non-cash charges, including $1.8 million to adjust the fair value of an interest rate swap. In the fourth quarter of 2007, unpaid dividends on the company's preferred stock contributed $33.1 million to its losses.

Quarterly sales jumped 29 percent to $65.6 million, from $50.9 million in the fourth quarter of 2007. Analysts surveyed by Thomson Reuters forecast the company would break even on a per-share basis, with sales of $63.9 million.

SmartBalance's sales were boosted after the company raised prices in February, June, and August to cover higher commodity costs. The company said case shipments also increased by 6 percent during the quarter. The company noted, however, that its gross margins declined because the price increases lagged the rate of commodity cost growth.

"I am pleased with our top-line growth for the quarter and the year, despite the challenging economic and commodity environments, and that we were able to pay down $50 million in debt during the year," said Chairman and Chief Executive Stephen B. Hughes in a statement.

For the full fiscal year, Smart Balance's losses narrowed to nearly $7 million, or 11 cents per share, from $101.7 million, or $4.12 per share, in the prior year. Full-year sales nearly doubled to $221.9 million, from $111 million in 2007.

The company noted that its results are not comparable because Smart Balance was a blank check company with no operations before its acquisition of GFA Brands in May 2007.

For the first half of 2009, Smart Balance expects sales to grow in the high-teens to mid-twenties percentage range.

"The food industry will likely experience uncertainty in 2009 around consumer reaction to the economy, potentially impacting the ability to generate trial of the company's premium priced products by new consumers," Smart Balance noted. The company said it plans to increase marketing investments in 2009 and pay down additional debt.

More numbers: Price to sales ratio is 1.96 while Price to Book is 1.03.
Profit margin was negative for the last 12 months at -3.14% while Operating margin was positive at 2.57%. Total cash is $5.49 million for cash per share of .088. Total debt is $69.50 million. Current ratio is 1.24. Book Value is $6.73. There are 62.63 million shares outstanding. Insiders own 10.9%. There is no dividend.

Sales are jumping. Earnings are about to go positive for the full year. The stock is trading almost at Book Value. But there are a lot of shares outstanding. And if the economy continues to deteriorate consumers will be less likely to try new items. Still, everyone knows that eating right is important. Smart Balance should be able to monetize that.

Company Web site: www.smartbalance.com

- Ted Allrich