Forest Laboratories' (NYSE:FRX) stock had a monster run in 2006 and finished the year with an increase of 24%. If the company's Q3 earnings release on Tuesday is any indication of what's in store for the year ahead, the pharmaceutical maker seems to be poised for a similar run in 2007.

The company reported a 20% increase in diluted earnings per share for the nine months ended Dec. 31, 2006, when compared with the same time period in 2005. Revenue and net income increased by 15% and 12%, respectively. The results prompted management to bump up prior earnings guidance for the company's fiscal year by 7%.

A key driver in this revenue growth is that Forest's antidepressant sales are booming. Lexapro, the company's cornerstone drug, has seen year-over-year revenue growth of 14% and now accounts for 61% of the company's total revenue. Lexapro does face fierce competition in a highly saturated antidepressant market that includes brand-name competition from products such as Pfizer's (NYSE:PFE) Zoloft, GlaxoSmithKline's (NYSE:GSK) Paxil, Eli Lilly's (NYSE:LLY) Prozac, and Wyeth's (NYSE:WYE) Effexor. However, I believe that Forest's expansion efforts, coupled with its smaller market capitalization, give its stock greater upside potential than the other four.

The company recently acquired the biopharmaceutical company Cerexa for $480 million. Cerexa is currently testing two injectable antibiotics, including the drug Ceftaroline, which is scheduled for phase 3 trials next year. This transaction should bring added diversity to the company's drug portfolio, which could face some challenges when Lexapro goes off patent in 2012. The company has also invested heavily in its own R&D pipeline, which includes Desmoteplase, a phase 3 drug candidate used for the treatment of symptoms of an acute stroke.

One of the more impressive aspects of this company I have seen is its share repurchases. It is not that uncommon for a company with a strong cash position to enter a bargain-hunting mode and buy back large blocks of its own stock following steep stock-price declines. However, this was not the case at Forest. The company repurchased approximately 6% of its total shares outstanding over the past 12 months, even as its stock price continued to climb. This practice shows that management thinks future earnings growth will offset the stock's rising valuation.

Does our Motley Fool CAPS community agree that Forest Labs is the best drug stock for 2007? So far, the stock has a three-star rating, with 83% of the players who have rated the stock showing a bullish outlook.

The CAPS community is awaiting your take on this stock. CAPS player Onahook has already given us his outlook -- he likes the stock's consistency as well as its management: "This has been an aggressive [pharmaceutical company] and has maintained firm and steady growth in tough markets as well as good markets for a number of years. Management is doing something right."

If you agree that Forest Labs is the best drug stock for 2007, rate it an "outperform" in CAPS. If you disagree, rate the stock "underperform." The drug stock with the most new net outperform ratings (outperform ratings minus underperform ratings) will win the contest.

Discover our other Foolish candidates for the best drug stock for 2007.

Fool contributor Billy Fisher does not own shares of any of the companies mentioned. Pfizer is a Motley Fool Inside Value choice. GlaxoSmithKline and Eli Lilly are Income Investor picks. The Fool has a disclosure policy.