TASER Turns Tempting

I'm tempted by TASER International (Nasdaq: TASR  ) .

Shares of the stock are down more than 20% since last Thursday, when the stun-gun maker reported good first-quarter results. Revenue rose 47%. Per-share earnings doubled. And free cash flow turned positive.

None of that mattered, though. Analysts expected $0.05 per share, instead of the $0.02 that TASER reported. Meanwhile, revenue fell $3.5 million short of Wall Street's estimates.

You know what? Boo-freaking-hoo.

There are perfectly legitimate reasons not to invest in TASER. Trust issues with management may be your cause for caution. But slapping around a stock because the Street got too aggressive is beyond silly. It's stupid.

Ready to take advantage? After last week's shellacking, TASER today trades for less than 29 times projected 2008 earnings. I might call that reasonable. Wall Street, however, wouldn't. Analysts believe that TASER will continue to improve its bottom line by 35% annually.

And that's a discount to historic norms. TASER has improved its net income by more than 100% a year, annualized, since 2002. When's the last time gun manufacturers Smith & Wesson (Nasdaq: SWHC  ) and Sturm, Ruger (NYSE: RGR  ) achieved that sort of growth?

Then there's the balance sheet. Debt assumed to settle shareholder litigation has since been paid off. As of today, TASER holds more than 10% of its market value in cash and investments.

Peer Applied Energetics (Nasdaq: AERG  ) also has a decent balance sheet. But the company formerly known as Ionatron has burned through tens of millions in cash over the past five years. It's almost as if it has a bonfire roaring in the lobby at HQ.

What of Stinger, you say? An endorsement from a local police department in Illinois is nice, sure. But the company's revenue has declined in each of the past three years, and free cash flow remains nowhere to be found.

You get the picture. TASER is growing rapidly, it's far and away the leader in its market, and it trades for a multiple that not even Wall Street thinks is fair. Time to ride the lightning, Fool.

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