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TASE My Portfolio, Bro

Happy Valentine's Day, TASER (Nasdaq: TASR  ) investors. Your company loves you. The stun-gun maker easily beat expectations in reporting $31 million in fourth-quarter revenue, a 61% year-over-year increase.

Bottom-line results weren't impressive, though. TASER earned $0.07 per share in Q4, matching the Street's view. But that's still a 75% gain.

For the full year, TASER shot past the $100 million mark in total revenue, up 49%, and per-share earnings reversed from a $0.07 loss in 2006 to a $0.23 gain for the full year. Let's allow CEO Rick Smith a bit of gloating. Quoting from the press release:

Our record year was the result of intense focus on building market-defining products and increasing our domestic and international market penetration. Most importantly, we continue to advance our state-of-the-art technology, enhancing our capability to protect life.

Anyone else waiting for "Buy now and we'll throw in a free MP3 player ..."?

What matters is that TASER is winning more big deals. At least seven domestic law enforcement agencies placed what the company called "significant" orders during the quarter. Sales outside the U.S. were also on the rise, accounting for 10% of revenue.

More foreign orders could be on the way. Earlier this week, TASER announced an overseas deal that Foolish colleague Rich Smith estimates could be worth $1.2 million. Impressive, yes? Not to Rich, who takes issue with TASER selling older inventory, and its price-to-sales (P/S) multiple compared to firearms manufacturers Smith & Wesson (Nasdaq: SWHC  ) and Sturm, Ruger (NYSE: RGR  ) .

Perhaps, but it's worth pointing out that TASER might have equaled 4% of its Q4 revenue in one deal.

Overpriced? Um, no
Truth is, I'm not convinced that TASER is as overpriced as Rich claims. There's simply no reasonable way to compare the stun-gun king to a 150-year-old gun maker like Smith & Wesson. TASER is growing faster and has more runway ahead of it. (Think of all those TASER parties!)

Outsized opportunities will always command a premium.

That's why, for investing's sake, new weapons makers offer more relevant comparisons. Companies such as Ionatron (Nasdaq: IOTN  ) , which trades for more than double the P/S ratio of TASER. Or even the recently zapped Stinger, which demands more than 57 times sales.

If there's a case to be made against TASER, it's that revenue costs more to obtain today than it did last year. Gross margin fell almost eight percentage points -- from 63.3% to 55.4% -- in Q4. But, if you'll allow me to borrow a cliche, TASER is making that up in volume. Take a look at cash from operations, which rose from $7.5 million in 2006 to $13.9 million last year.

In short: TASER, although stunning few, is making progress. And yet its shares are trading for a lower multiple to earnings than they were a year ago. No way is that fair.

TASE my portfolio, bro.

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