RadioShack (NYSE:RSH) gives me a bit of consumer guilt. I visit the place often, but I always walk out with little bags of connectors, solder, and wire. You know, small change. When I need a TV, DVD player, or computer component, I shop elsewhere. I always wonder how the place can survive with customers like me.

Pretty well, it turns out. Yesterday's fourth-quarter and full-year 2003 numbers reveal a retailer that's doing plenty to wring profits out of its well-known brand. Quarterly net income came out to $0.77 per share. That's a respectable 22% rise over last year's figure, and it looks even better (a 31% spike) when you back out the unusual gain that lifted the fourth quarter of 2002. For the full year, the Shack attacked with net sales of $4.6 billion, yielding $1.77 per share on the bottom line, up 22% from 2002.

Sounds super, but it's not all beer and skittles under the big red letters. Comps were flat and total sales ticked up only 2%. That makes the firm's austerity initiatives, like increased inventory turnover -- for a 21% drop in year-end stock compared to 2002 -- and a modest improvement in gross margins, very important. Still, you may wonder how long this kind of cost cutting can bear fruit.

You wouldn't be the only worried wart. Fool colleague Alyce Lomax recently questioned whether brisk fourth-quarter sales of items like Sprint PCS (NYSE:PCS) and Verizon (NYSE:VZ) cell phones could keep the company in the running against electronics powerhouses like Best Buy (NYSE:BBY) and Circuit City (NYSE:CC), or price choppers like Wal-Mart (NYSE:WMT) and Target (NYSE:TGT).

But maybe there's no need for pity here. After all, the Shack put up $421.5 million in free cash flow for 2003 and ended the year with $634.7 million in cash; $90 million more than long-term debt. At $35 a stub, shares trade at a forward P/E of 18, based on management guidance. That may look fully valued given the presumed 14% earnings growth, but the current enterprise value-to-free cash flow ratio of 13.6 looks pretty snazzy when the rest of the market is twice as pricey.

RadioShack too big for your tastes? Give Hidden Gems a try, and join Tom Gardner's band of merry small-cap hunters. You'll find stock ideas and learn to do nifty cash flow valuations, too.

Fool Contributor Seth Jayson wonders why there's no longer a space between the words radio and shack. He has no stake in any company mentioned here.