Embattled would be a great word to describe non-lethal weapon manufacturer Taser (NASDAQ:TASR). The latest battle is with the New York Times (NYSE:NYT).

Dow Jones' (NYSE:DJ) Barron's, Viacom's (NYSE:VIA) CBS, and now the Times have questioned whether a Taser weapon is "non-lethal." The company has responded with hard-hitting press releases that provide links to a wealth of data on the company's website -- including a list of deaths and the medical examiner results that show none to be directly Taser-related.

Two cases cited by the Times include a person with 20 times the normal doses of ephedrine and promethazine in their blood and another who had "PCP Intoxication" as a secondary cause of death. These are hardly clear-cut cases of cause-and-effect deaths.

For investors, owning Taser has been a heart-pumping experience. The stock is up 1,600% in the last 52 weeks -- and sells this morning for one-half the all-time high it hit in April. Talk about a roller coaster.

The catalyst for the explosive stock movement is an explosion in sales and earnings. The company reported this morning that second-quarter sales increased 290% and net income increased 1,194% from one year ago. In the first six months of 2004, the company's cash position almost doubled to $34.6 million.

With orders 27% higher than the previous quarter's all-time high level, the company revised its annual sales guidance from 100% revenue growth to 150%.

The knock on Taser stock is that it has a market capitalization of $920 million. That is extremely high when you consider that the latest quarter's record sales were $16.3 million.

Taser, though, has a 27.5% profit margin. Microsoft (NASDAQ:MSFT) has margins of 19.9% and sells for 40 times earnings. Wal-Mart (NASDAQ:WMT) has 3.3% margins and sells for 25 times earnings. Isn't it reasonable for Taser to be selling for 40 times 2004 estimated earnings?

So, let me answer the email before it arrives. When is the right time to sell Taser? Look for any promising competition. If it can get established, it will erode margins. Also, watch the sales growth rate. Revenue growth will not stay above 100% in 2005. But any failure to deliver promised orders should be taken seriously.

A death directly related to the weapon would be a significant blow. But even that might have a muted long-term effect because of the significant drop in serious injuries when a Taser is used. The fact is, the weapon is superior to putting a bullet hole in someone, and it creates fewer injuries than using batons and other hands-on force.

The stock was down 12% at noon. Is it time to sell? Hardly. The company has established a beachhead in the non-lethal weapon category.

Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.

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