Schiff Nutrition International (SHF) has reported positive earnings surprises in two out of the past three quarters, and is scheduled to deliver fiscal fourth-quarter results on July 23. Earnings estimates for this nutritional supplement company have been trending higher, which made it a Zacks #1 Rank (Strong Buy) stock on July 13, 2012.

Solid Third Quarter

On March 22, Schiff Nutrition reported adjusted earnings per share of 16 cents for its fiscal third quarter of 2012, beating the Zacks Consensus Estimate by 33.3% and the year-ago result by 14.3%. Net income increased 14.5% year over year to $4.6 million. Adjusted EBITDA was $9.3 million, up 25.7% from a year ago.

Net sales climbed 25.0% to $72.2 million, beating the Zacks Consensus Estimate by 9.9%. The growth in top-line partly reflects new offerings and progression of key brands. Selling and marketing expense amounted to 25% of revenue in the reported quarter, higher than 14% in the year-ago period.

The company raised its revenue guidance for fiscal 2012 to between 16% and 19% from the earlier projection of 12% to 15%. The gross margin range has been lifted to between 44% and 46% from 43% to 45% earlier. Schiff Nutrition continues to project operating margin in the upper single-digits for the fiscal year.

Earnings Estimates on an Incline

The Zacks Consensus Estimate for fiscal 2012 has risen 4% in the last two months to 52 cents per share, representing an estimated year-over-year growth of 20.9%. For 2013, the Zacks Consensus Estimate moved up 12.5% in three months to 72 cents, reflecting an implied growth of 38.9%.

Stretched Valuation

Schiff Nutrition trades at a premium to its peers by most metrics, such as price-to-earnings and price-to-sales. The stock is currently trading at a forward P/E of 26.3x, an 81.7% premium to the peer group average of 14.5x. Similarly, on a price-to-sales basis, the stock is trading at 1.7x, 36.0% higher than its peer group average of 1.25x. The trailing 12 month return on equity (:ROE) of 14.4% is in line with the peer group average.

Chart Reveals Strength

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Schiff Nutrition Int'l (): Zacks Rank Buy