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CNS "Nose" Best

By Rick Aristotle Munarriz (TMF Edible)
April 30, 2004

It was easy to be skeptical when CNS (Nasdaq: CNXS) rolled out its Breathe Right nasal strips. Even if they allow for easier breathing, they sure looked funny. Who would wear such a thing in public? Then footballers like Jerry Rice took a shine to the strips and had no problem wearing them on Sunday afternoons. OK, they passed the fashion test, but would they be little more than a passing fancy?

Well, the Andy Warhol clock has counted down the company's 15 minutes of fame -- over and over again. It's clear that CNS and its Breathe Rights are no flukes. They are both here to stay.

Last night, the company wrapped up its fiscal 2004 year in solid fashion, topping its earlier projections. On the year, CNS saw sales grow by 10%, while higher operating margins produced a 32% uptick in operating profits.

Matt Richey recommended the stock last year in our Hidden Gems newsletter and he's not the only Fool that's smitten. And it bears pointing out that CNS is no longer a one-product company. Beyond expanding its Breathe Right line, it also makes other compound-word enhancers like FiberChoice chewable tablets and Vapor Shot vaporizers.

No, this isn't the kind of merchandise that's going to rocket the company past consumer heavies like Procter & Gamble (NYSE: PG) or Johnson & Johnson (NYSE: JNJ), but there's always promise for the nimble. After all, once you have your foot in the door at just about every drugstore, grocer, and general merchandise retailer, why not try to push more products into the distribution channels?

An abrupt end to the flu season had the company waxing pessimistic earlier this year, but CNS pulled through 2004 fairly well, and management sees continued improvement through fiscal 2005. Guiding investors to profit growth between 7% and 16% with sales growing in the mid-single digits, CNS has its sights on widening margins further in the year that lies ahead.

The stock closed yesterday at just 16 times its median profit target. That leaves some valuation upside for a company that is apparently doing a few more things right than just breathing.

It's no slam on CNS that it has thus far proved a laggard among Motley Fool Hidden Gems recommendations. It's a tough crowd. Take a free trial and see why.

Longtime Fool contributor Rick Munarriz thinks the only thing that would look funnier than donning a nasal strip over the bridge of your nose would be missing out on investing in a promising company that has passed the laugh test. Then again, he must look pretty funny because he does not own shares in any of the companies mentioned in this story.

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