With barely two weeks of courtroom shenanigans behind her, the trial of Martha Stewart-- over her questionable sale of ImClone (NASDAQ:IMCL) shares -- already looks like a high school TV drama. (ruthless but popular senior girl and her junior hunk take on hapless freshman). So far, the typical headlines have been less than creative: Pretty Purse; Jury Shuffle; He Said/She Said; Liar, Liar; Snow Day; The Dog Ate My Paper; Time Out.

While these tabloid matters transfix the rest of the country, here at The Motley Fool we like to focus on the business fundamentals. The real question is how these tawdry headlines translate onto the bottom line for Martha Stewart Living Omnimedia (NYSE:MSO), the lifestyle publishing powerhouse that the domestic diva built with an iron-gloved fist from the ground up.

There's no question that over the last 18 months the market's taken a bite out of Martha's company. Shares dipped from $20 in March 2002 to $6 in October of that year, before recovering in fits and starts to current $13 levels.

This whole mess has taken its toll on operations, too, with sales and earnings dipping for the past several quarters. But despite the company's dismal showing for the third quarter of 2003 (it hasn't reported 2003 Q4 earnings yet), there are reasons to be optimistic about the future. Investors can take heart in the fact that the firm has $175.4 million in cash and equivalents in the bank and no debt on the books. This plus strong products and partnerships -- remember Kmart (NASDAQ:KMRT) -- should keep Martha Stewart the enterprise going strong in the face of its founder's legal woes.

David Gardner and Motley Fool Stock Advisor subscribers have certainly enjoyed playing the contrarian on Martha. Since David recommended Martha Stewart in the Nov. 2002 issue, the stock's rocketed up 115%, vs. the S&P 500's rise of 35.5% over the same period. Asked for his thoughts on the latest Martha developments, David had the following to say:

The story of a profitable company with high-quality products that suffers at present from an embattled founder remains the same. I believe that Martha will wind up without any significant judgments against her, and I don't think she'll do jail time.

And while she may remain a lower-key figure at her company for the years to come, there are enough smart people working at that company to make the Martha name (still attractive to so many people) and the Martha lines of products (attractive for their quality to even more people than that) a good long-term bet for business success.

As for the stock from here, I think a lot of the short-term juice is spent. I think it's fine to buy it here, but with reduced expectations that it'll perform much above the market at this stage. Should the market remain strong, I think MSO could underperform it over the next year. Should the market sell off, I believe the underlying value of MSO will keep it in place, therefore making it a market beater.

David Murphy doesn't own shares of any of the companies mentioned.