Before today's open, everybody's favorite non-lethal weapons manufacturer (your "conducted energy weapons" company), Taser
Clearly, this gem is no longer hidden. Merely in anticipation of good earnings and a positive conference call this morning, the stock surged to an all-time high yesterday. At one point, the stock was up 12.5% on the day and had gained 6,400% over the last 52 weeks.
Investor interest was also evidenced by today's conference call, starting with 280 listeners -- up from 120 last quarter. Just like rising smoke gets noticed, so does a soaring stock. And when was the last time a conference call started with a discussion of a Viacom
Unfortunately for shareholders, in the conference call's wake, the stock that defied gravity for more than a year stunned the hands that hold it. In morning trading, Taser was down more than 15% and more than 20% from yesterday's high. Talk about a lethal weapon.
Taser now trades at roughly 100 times its projected 2004 earnings. What could possibly justify so rich a valuation? A few things, maybe.
For one, existing customers are being encouraged to upgrade to a newer model that's 60% smaller and lighter. Indeed, plenty of officers in the U.S. are still without a Taser -- and the international market (with the U.K. and France doing evaluations) is just starting to warm up.
Military uses are also under study in Iraq and new weapons systems are under development with General Dynamics
Over time, there will be ongoing sales of "cartridges" -- the Taser equivalent of ammo. Just as Gillette
But is Taser -- or anything for that matter -- safe now that it's up 5,000% and trading at 100 times forward earnings? Rather than wrestle with that complex and perilous question, consider taking a page out of Motley Fool Hidden Gems and dig up other small companies that have strong business prospects and solid management and are exhibiting early-stage growth.
Sure, it's been fun, but riding investor bandwagons is notoriously harrowing.
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Fool contributor W.D. Crotty was amused that the slide presentation for the conference call "had technical problems" and eventually crashed. He does not own stock in any of the companies mentioned.