Sometimes, the stock market makes me crazy. It's the hype. Businesses built solely on promises can create outrageous gains over short periods.

Take NVE (NASDAQ:NVEC). Investors have bid the shares up more than 132% this year, hoping that the company's magnetic random access memory (MRAM) technology would see a major licensing deal with former Motorola (NYSE:MOT) unit Freescale Semiconductor. So far, nothing of the sort has occurred.

Blame the NVE hype machine. Over the summer, it raised the possibility of an agreement with Freescale. But I'll get back to that. First, let's consider some numbers to see whether this stock is as worthwhile as some Motley Fool CAPS players believe.

Capital IQ says that NVE produced roughly $3 million in free cash flow (FCF) over the trailing 12 months. Nearly all of that may be attributed to its growing electronics business, which recently inked a $480,000 deal with the Defense Department. St. Jude Medical (NYSE:STJ) is also a client.

Does that mean these shares are cheap? Back to the math, starting with shares outstanding. Capital IQ says there were 4.617 million shares available as of the most recent quarter.

Now we need to discount NVE's future cash flows. But at what rate? That's harder to judge, but I'd say a speculative stock such as this would have to produce a 15% annual rate of return to be worthwhile. Therefore, using 15% as our discount rate, NVE would have to grow free cash flow by -- wait for it -- 32% annually for 10 years, and 3% thereafter, in order to justify its current valuation. Want to bet that will happen? I wouldn't.

As if that would stop NVE CEO Dan Baker. He told investors in August that Freescale's newest MRAM products could come "within the scope of claims within a number of NVE patents." Speculators expecting a huge payday in royalties went crazy. The stock soared from $14 to $31 in two months.

Yet consider this 2004 in-depth analysis of NVE's patent problem from Fool contributor Jeff Young. Allow me to quote:

"The highlight of what NVE calls its 'watershed' MRAM patents is something known as a 'one-transistor-per-bit read addressing scheme.' This invention relates to the electrical circuitry supporting a memory cell, but has nothing specific to do with MRAM. Further, the claim is based on so much prior art that it's meaningless and unenforceable. The DRAM in your PC has relied on this approach for decades."

What's changed in two years? How about nothing? Well, one thing: a mid-'90s licensing deal between NVE and Motorola wasn't transferred to Freescale, and it no longer exists.

Meanwhile, the one investor that appeared to believe in the business, Insight Capital Research & Management, cut and ran in November after a month holding shares. Remind me again what's holding this stock up? Oh, that's right -- hype.

That's why I'm sticking with my underperform call in CAPS. As I said there, every so-called Silicon Valley breakthrough takes at least a decade to be an overnight success. We might as well be in year one with MRAM.

Merry Christmas, NVE speculators; enjoy your gains while you can. And don't be surprised if Baker turns out to be more Grinch than Santa.

There's a whole world of naughty and nice out there! Take a look at the rest of the bunch.

Fool contributor Tim Beyers , ranked 612 out of 17,226 in Motley Fool CAPS , isn't a fan of the Grinch. And he still believes in Santa. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. Get the skinny on all of the stocks in his portfolio by checking Tim's Fool profile . The Motley Fool's disclosure policy is the gift that keeps on giving.