It didn't take Austin Powers' Dr. Evil using a "lay-zer" to singe Biolase Technology's (NASDAQ:BLTI) stock price. It was only necessary for the maker of dental, cosmetic, and surgical lasers to report that second-quarter earnings will be flat for investors to be scared off.

Biolase's premier product, the Waterlase, is a dental laser that spins and explodes a blast of water, light, and air without the noise -- or pain -- of a traditional drill. Despite being popular, distributors have plenty in stock, and sales are expected to be flat. As much as the markets don't like uncertainty, they don't like to be certainly wrong, either. Analysts had expected EPS of $.06 next quarter, and the company was forecasting $.03 per share. Biolase fell by more than 25% on the news. It seems as though painless dentistry can still be painful to shareholders.

Still, it's an industry built upon technological improvements, a game of one-upmanship. What is the market leader today may very well be the market laggard tomorrow. Dental and cosmetic laser companies are a competitive bunch, and the industry has seen lots of consolidation even as the sector has been under strain lately. Leaders such as Candela (NASDAQ:CLZR) missed analyst projections but gave higher guidance for the year and still saw the stock knocked down. Palomar Medical Technologies (NASDAQ:PMTI) and LaserScope (NASDAQ:LSCP) did Mini Me routines, reporting good numbers but sliding nonetheless. BriteSmile (NASDAQ:BMSL), which traded as high as almost $20 last year, has seen its stock price halved.

The industry is still primed for growth, with expectations as high as 45% or more. The cost of owning a laser is shrinking, opening up opportunities for more small businesses, including non-medical offices, to own one. It's profitable, too. Margins tend to be high, 50%-60% or more, which makes it attractive for competitors wanting to get in on the game. There are a lot of smaller players in the field, companies that trade on the OTC bulletin board, such as Valley Forge Scientific, or in the pink sheets, such as Lumenis and American Medical Technologies.

At the same time as the earnings announcement, Biolase reported a 1.25 million share repurchase program over the next 12 months. Share buybacks, at least ones that are done to reduce the number of shares outstanding and not merely offset stock option programs, can significantly increase shareholder value and are a good use of cash. Considering that investors did not like the company's earnings report, it looks as though they gave management an excellent opportunity to begin buying right away.

Biolase sports trailing structural free cash flow of more than $20 million. It has no long-term debt and more than $50 million cash in the bank. It's a strong, clean balance sheet. If the company can avert any more disasters (it's in litigation over patent infringement of its Waterlase; it had to restate earnings going back to 2000; and the SEC contacted it regarding an informal inquiry), this could eventually be a company with some good potential.

Fool contributor Rich Duprey owns shares of Candela, but not of any of the other stocks mentioned in this article.