Bottom Line: Oriflame's attractions

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The Independent Online
ORIFLAME International, the cosmetics company that relies on door- to-door salespeople, impressed the stock market yesterday with a 34 per cent increase in pre-tax profits to pounds 11.9m for the year to 31 December.

The shares rose 5 per cent to 226p in response. But Oriflame deserves even better, and the shares could outperform the market by a wide margin over the next few years.

Central to Oriflame's potential is its global presence. After the fall of the Berlin Wall many companies talked about expansion into Eastern Europe.

Oriflame is one of the few actually to explore the new markets and profit from them. Its sales are particularly strong in Poland.

It is also in Latin America and Asia as well as many developed Western countries.

Oriflame has a sales force of 150,000 working in 40 countries. Each is paid only on commision. In Western countries this extra money is a useful addition to household budgets, particularly when times are hard, but in developing countries it represents a living wage.

As a result the salespeople in less prosperous places are that much more loyal - important because this kind of business is only as strong as its sales force.

Shares in Betterware, a British- based company that sells brooms and clothes pegs door to door, have outperformed the market by 1,000 per cent over the past three years.

On yesterday's closing prices Oriflame is trading on a forward multiple of 10 times earnings where Betterware trades on a prospective multiple of 22 times.

Oriflame's prospective yield is 5.7 per cent; Betterware is giving 1.3 per cent.

Buy Oriflame.

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