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American consumers have really taken to organic, healthier, more expensive food options. In a time when the U.S. economy slowly recovers and jobs are still scarce, upscale grocery stores such as Whole Foods Market, Inc. (NASDAQ: WFM) are thriving and continuing to show earnings growth. It may make you ask yourself if consumers stop buying these foods, how bad must the economy be?

My pick today is an emerging health food company that uses microalgae to create its natural health foods and nutrition supplements. The stock is Cyanotech Corp. (NASDAQ: CYAN). This is certainly not your run of the mill health food company, but that is why I am interested. The company is very small and has a niche that, if marketed well, could be a success.

Fundamentally, the stock has a market cap of $24.02 million and currently has a price to earnings of 9.17. CYAN is trading at a discount to sales with price to sales at 0.90. Additionally, the company shows a price to book of 1.38 and a price to cash of 6.65. Current ratio shows up at a solid 4.12 due to the company's low debt to equity of 0.13 and cash per share of 0.66. Earnings are expected to rise 105.35 percent this year. One thing about this stock that I really like (and is certainly an important factor to consider when investing) is the insider transaction rate and the institutional transaction rate. Over the past six months, insider (board members of Cyanotech Corp) transactions are up 71.31 percent and over the past three months, institutional (banks, firms) transactions are up over 88 percent. To summarize, executives and investment firms have been grabbing up shares left and right. This is an extremely bullish signal that should be considered.

Technically speaking, the stock has been in a down trending channel since last July. Year-to-date the stock is down 5 percent and the stock has lost over 53 percent in the last year. The current price action trades 21 percent below its 200-day moving average and 5.5 percent below its 50-day moving average. This means the stock is stuck in a strong down trending market and it will take a serious change in direction of the business to get out of that trend. This stock will likely see more time in the downward channel but I expect Cyanotech to be a long-term winner.

The bottom line here is that Cyanotech is a very small, emerging health foods company that certainly has a niche. As I stated, despite the economic conditions, consumers are still paying the extra premium to shop at upscale organic groceries such as Whole Foods. This bodes well for Cyanotech as it tries to expand its brand. Fundamentals are solid, especially the huge purchases from executives and banks. This could be a foreshadowing of the stock busting out of its downward trend. Cyanotech is ultimately a long-term winner but I would wait for the stock to get out of its downtrend before buying.

Source: Emerging Health Food Company With Upside Potential