TurboChef Bakes Red

TurboChef (Nasdaq: OVEN  ) traditionally manufactures ovens (shocking, I know) for the commercial marketplace, but the company will also be promoting residential units this year. Is this stock about to rise like freshly baked bread, or should your portfolio's kitchen be outfitted with some other investment idea?

For the fourth quarter, revenues increased 63% to $15.2 million. The net loss came in at $0.16 per diluted share -- this compares to the net loss of $0.25 per diluted share that was recorded in the year-ago period. If you exclude a $1.9 million charge related to a fire that destroyed inventory under the aegis of a third-party assembler (apparently TurboChef is having some trouble collecting money from that assembler), then quarterly earnings came in at a loss of $0.10 per diluted share.

TurboChef also failed on the free cash flow front. It used more than $17 million in cash for operations in 2006, following a trend of negative operational cash flow or negative free cash flow over the past few years.

So, what are we to make of TurboChef and its long-term prospects? I think TurboChef does have a valuable product line on its hands; businesses that sell hot, cooked foodstuffs -- think Subway (the company's big client) and Whole Foods -- are always in need of fast and reliable preparation devices. In addition, the company has been chosen by Starbucks (Nasdaq: SBUX  ) to add value to its breakfast-serving initiatives. Problem is, there might be a better investment idea out there if you're looking for exposure to this kind of business. Competitor and Motley Fool Hidden Gems pick Middleby (Nasdaq: MIDD  ) has much better-looking trends that show positive operational cash flow and net profits over the last few years.

The company seems to be doing okay in terms of getting its ovens out into the market, and it will be pushing its residential unit come this April. Also, it has been making significant strides in growing its customer base beyond the Subway chain. But I'd rather wait for a couple more earnings reports to see how TurboChef's financials shape up before investing. Revenue growth has been good for the last two quarters, on a sequential basis -- TurboChef needs to keep the top line cooking and those bottom-line losses narrowing.

Further Foolish fun with TurboChef:

• Foolish Forecast: TurboChef Fires Up
• TurboChef Dices Q3: Fool by Numbers
• Should TurboChef Be on the Menu?

Middleby is a winning Motley Fool Hidden Gems pick. To see what other small-cap superstars the team has cooking in its oven, take a free 30-day trial of the newsletter service today.

Fool contributor Steven Mallas owns shares of none of the companies mentioned. As of this writing, he was ranked 16,184 out of 23,971 investors in the CAPS system. Don't know what CAPS is? Check it out. Starbucks and Whole Foods are both Motley Fool Stock Advisor selections. The Fool has a disclosure policy.