Last week, PossisMedical (NASDAQ:POSS), maker of the AngioJet blood clot-clearing system, issued a press release reassuring its investors that all is well. Early Thursday evening, the company reaffirmed that the lowered earnings guidance it released back in May remains accurate and that fiscal 2005 should see the company record $65 million in revenues and $0.34 to $0.35 in profits per diluted share.

Unfortunately, all is not well, nor has it been for some time. Saying differently doesn't make it so.

On the surface, Possis's message seems reassuring. While the company's press release refers to "reaffirming" guidance, what the company actually did was tighten up and increase that guidance a bit -- for the second time in six months. Back in February, Possis warned that its earnings would decline year over year, probably winding up somewhere between $0.30 and $0.36 per diluted share in fiscal 2005. In May, the company tightened that range up a bit, putting likely profits at $0.32 to $0.35 per diluted share. When Possis further shrank that range last week to $0.34 to $0.35 per share, it could fairly be interpreted as both "raising guidance" and as a sign that the company is righting its corporate ship.

But it's still not enough to justify Possis's stock price. You see, when it upped its fiscal 2005 guidance, it also reaffirmed the fiscal 2006 guidance it had released back in May. The company predicts that fiscal 2006 will see revenues between $69 million to $74 million, margins similar to what it expects to achieve in fiscal 2005, and pro forma (Latin for "pay no attention to the stock options behind the curtain") earnings of $0.40 to $0.50 per share.

Those numbers don't include stock option expensing, of course; Possis hasn't provided adjusted numbers, nor estimates of how much it intends to dilute shareholders next year. Without that information, I think it's reasonable to judge the company's forward growth rate based on revenues alone for the time being. The high point of Possis's revenue forecast next year ($74 million) equates to 14% growth year over year; the low end would yield just 6% growth.

Possis currently sports a trailing P/E of 28 -- twice its best potential growth rate. Analysts' consensus estimates give it a 28 forward P/E as well. Hence the danger: Unless Possis hits the high end of its revenue target next year and increases net profits twice as fast as it grows those revenues, the company will prove overvalued at its current price and may fall further.

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Fool contributor Rich Smith has no position, short or long, in Possis Medical.