The margins had fallen significantly in the last quarter on a sequential basis. Q4'12 margins were 4.4% compared with 6.8% for Q3'12. For the full year 2012, the margins were 6.4%. The earnings for Q1'13 are expected on 7th May. If we remember, after the disappointing Q4 earnings, the stock had fallen from $63 to $51 in one day. This time, if the company can beat expectations, then there may be some stability in the stock. If it disappoints, then the recent lows can be tested. In addition, there is a bit of an overhang of the investigation for misstatements by officers and directors of VSI over the last year or so. That is a serious issue and it will be great if the company can come out with some clarification on that in some manner. Fundamentally, it is trading at slightly high valuations (24 times earnings). Price to sales is 1.52 but the low margins in the business make even this figure a little high. Importantly, P/B is 3.2. However, the forward P/E of around 17 indicates expectations of growth over the next couple of years. Growth has to come from inorganic growth, like the acquisition of Super Supplements in 2012 or through launch of novel products. A smaller company, ChromaDex Corporation (CDXC) had recently launched an energy drink containing a combination of its proprietary ingredient pterostilbene and caffeine. The combination makes it possible to achieve same levels of energy with very low dose of caffeine. This ingredient has ben successful for ChromaDex in the past with a product called BluScience containing the ingredient being sold for $6.2 million. Investor Barry Honig increased his stake in ChromaDex after the launch. VSI would do well to get new products in the market so that it can take maximum advantage of its stores expansion plan for 2013. It had opened more than 50 stores in 2012, and had indicated a similar expansion plan for 2013.
