Usana’s “strong” return on equity numbers issued some upgrades and downgrades late last week, and had this to say about Usana Health Sciences:

Nutritional and personal care products developer USANA Health Sciences (USNACramer’s TakeStockpickr) has been upgraded to a buy from a hold. Its revenue increased by 16.9% in the third quarter compared with the same period last year. Earnings improved to 70 cents a share from 55 cents per share over the same timeframe.

The company’s return on equity improved to 184.53% in the third quarter compared with 78.97%, a signal of significant strength within the corporation. This return on equity greatly exceeds that of both the industry average and the S&P 500. USANA Health had been rated a hold since August 2007.

Somebody missed the boat when they said that the return on equity figure was a sign of “strength.”

Usana’s return on equity ratio has gotten so high because of the share buyback program. Usana has significantly reduced the shareholders equity figure on the balance sheet, so even if earnings remain at a constant level, the return on equity ratio will go up a lot.

And… they also failed to realize that at the same time shareholders equity is plummeting, the company’s debt level is skyrocketing. Not a sign of strength at all.

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