I probably have more than 2,000 comic books stored away, most of them collected when I was teenager. It's a very rare occasion that I actually take one or more from the boxes and reminisce, but when I do I instantly recognize the story. It's very Hollywood, actually: Hero taken to the brink, only to summon the courage at the last second to sidestep the villain's dastardly plan, thus clutching victory from the jaws of defeat.

After a lengthy period of thumping the market and contemporaries, Motley Fool Stock Advisor pick Marvel Enterprises (NYSE:MVL) is starting to look, well, mortal. Thursday, the creator of Spider-Man reported lower operating margins and income. Second-quarter operating margins declined from 48% last year to 41% during the June period. Earnings were $0.25 per share, down from last year's $0.28. The report caused investors to flee like the terrified mob cowed by Dr. Octopus in Sony's (NYSE:SNE) Spider-Man 2, sending the stock lower by more than 12%.

Marvel's cost of sales, as well as taxes, provided the one-two punch that sent it reeling. Marvel spent more than $62 million to do business during the second quarter, a 266% increase over last year's $17 million. And with losses finally behind it, Marvel's effective tax rate jumped higher and farther than The Hulk's signature leaps, to 32% from 16% a year ago. In total, the Feds took more than $15 million from Marvel's bottom line.

That's not to say there wasn't good news in the report. Marvel's sales jumped 73% to $155 million. And Marvel revised upwards its total 2004 guidance. Still, the revised numbers show a decline in income on higher sales -- mixed news to say the least.

As with its many comic book heroes, Marvel now appears to be entering a period where it will be tested repeatedly, and the company will likely have to squeeze pennies to make investors happy. Yet there's reason to be hopeful. In a post to our Marvel discussion board Fool contributor Rich Smith points out that Marvel's stock may be vastly undervalued on a cash flow basis.

Indeed, free cash flow has been one of the company's major strengths, and there's no reason to think this won't continue. Moreover, films starring Elektra and the Fantastic Four are in the works, and deals for new episodes in the X-Men and Spider-Man series have apparently been inked. Don't count our hero out just yet.

For more Fool coverage of Marvel:

  • A battle royale over royalties has led Marvel to sueDisney (NYSE:DIS).
  • Marvel's share repurchase plan might not pack the wallop investors want.
  • Spidey has been a hit with summer moviegoers.

Marvel Enterprises is one of David Gardner's winning picks for Motley Fool Stock Advisor. He and brother Tom continue to slap the market silly. You can too. Give Stock Advisor a try risk-free for six months.

Of all the Marvel heroes, Fool contributor Tim Beyers was always partial to Spider-Man. Tim owns no shares in any of the companies mentioned, and you can view his Fool profile here.