When a second bidder made a pass at Physicians Formula Holdings Inc. last week, the Azusa cosmetics company started to look even better to investors.

The company’s stock had already hit a 52-week high last Wednesday – up 27 percent over the year – thanks to a two-year makeover that resulted in improved operations and wider retail distribution. Then shares leaped more than 10 percent Thursday when the company announced it had received a competing offer to take it private.

Physicians Formula, which sells high-end cosmetics such as face powders, eye liners, mascara and, more recently, skin care products, last month announced that it had agreed to go private in a deal with San Francisco private-equity firm Swander Pace Capital. But on Sept. 6, the company said it received an offer of about $67.2 million – $2.2 million more than the original offer – from an unnamed party. News of the rival bid sent the stock soaring to $4.83 from $4.37 the previous day.

Lee Giordano, an analyst who covers the company for Imperial Capital LLC in New York, said that while recent stock performance has been directly related to acquisition news, the stock’s long-term growth has stemmed from the company’s improved efficiency and willingness to innovate.

“It took years of planning and strong effort by the management team to really turn around the business, and they’ve succeeded,” he said.

In a conference call with investors last month, Ingrid Jackel, the company’s chief executive, said Physicians Formula saved $200,000 in the first half of the year after improving manufacturing processes. Furthermore, she expects a new contract with the company’s transportation provider to save an additional $300,000 annually.

“We are pleased with the progress we’ve made to refine our business model,” she said. “The savings we have achieved are helping offset some of the cost of our brand investments.”

Those brand investments have included aggressive marketing campaigns as well as a skin care line that debuted in Wal-Mart stores nationwide in 2011. In January, the company expanded the line’s presence to retail chains such as CVS, Ulta Beauty and Kroger.

Giordano said the skin care line has yet to make much money for the company, but so far has helped to improve visibility of the brand.

Today the skincare line is sold in about 8,000 stores nationwide, and by the end of the year the company expects to be in as many as 50 percent more.

The company also announced last month that it will begin selling products in a new beauty category, which Jackel has yet to disclose.

For reprint and licensing requests for this article, CLICK HERE.