TASER International (NASDAQ:TASR) shares have nearly tripled in value over the course of the past 12 months. That's the good news. And the bad news? After having run up so far, so fast, there was little room left for the shares to climb after beating earnings tonight. Afterhours quotes show the stock trading up less than 1%.

Full-year 2013 financial results featured:

  • A 20% rise in sales to $137.8 million.
  • 330 basis points' worth of gross margin improvement (to 62.3%).
  • A 250 b.p. improvement in operating profit margins (to 22.1%).
  • 35% better net profits.
  • 37% better profits per diluted share -- $0.37.

If there was bad news to report at TASER last year, it was came from the company division that's arguably the key to TASER's future success: EVIDENCE.com. According to TASER's income statement, the EVIDENCE.com & Video business was nearly as big a money-suck in 2013 as it was in 2012, posting an operating profit margin of negative 92%, and necessitating such huge investments in capital spending as to cut the company's free cash flows down to just $9.4 million.

That was a significant reduction from the $24.8 million in cash profits that TASER produced in 2012, and less than half the $19.8 million in GAAP net profit that TASER reported for 2013. It also means that if you thought the company looked expensive at its current P/E ratio of 39.5 -- you're almost certain to be dismayed upon realizing that if valued on free cash flow, TASER sells for a shockingly high multiple of 104.

Nor is this likely to change in the immediate future. As TASER CEO Rick Smith cautioned: "To further solidify our leadership position in the law enforcement technology sector, we plan to increase our investment in R&D initiatives related to our next generation video products in 2014." This suggests that free cash flow in the current year could look even worse than what we saw in 2013.

It's all in the service of growth, granted -- and given the promise of the recurring revenues business model that is EVIDENCE.com, I think it's also the right move for TASER. But it's not likely to make the stock look cheap any time soon. 

Rich Smith and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.