LoJack (NASDAQ:LOJN), famous for its renowned stolen-car recovery technologies, has had a tough time since it reported earnings for its first fiscal quarter last week. The stock may be down, but was the selling warranted?

Total net sales rose 18% to $50.7 million. Operating income saw a decrease of 6%, equaling $4.1 million. Net income increased 11.4% to $2.9 million, or $0.15 per diluted share.

There are some pretty positive sales trends noted within the release. Unit volume for the domestic market advanced 28%, and domestic revenue sales increased 18%, to $35.2 million. LoJack highlighted the fact that the sales of new vehicles only appreciated by a single percentage point, thus making these achievements all the more impressive. International sales were also stellar. For this segment, unit volume rose a whopping 38%, while actual revenue dollars jumped 22% to $10.7 million. The Latin American and South African territories were particularly active. An offsetting element to all this is the company's admitted disappointment with its Boomerang Tracking business, which saw a revenue increase of only 8% based on the effect of currency fluctuations.

The gross margin for the quarter was 51.2% versus 51.4% in last year's similar timeframe. The operating margin was, of course, challenged, considering the drop in that value. It was 8.1% versus 10.1% last year. The net margin also saw a pullback to 5.8% versus the previous 6.1%.

Investors' hesitance over the quarter may have been somewhat justified by the pressure on margins and the decrease in operating income. We see that litigation and severance costs, along with non-cash stock compensation expenses, affected the quarter. Also, a report on the release of the latest 10-Q showed that net cash from operating activities did decrease significantly, falling 39% to $2.4 million, because of changes in working capital, tax benefits, and revenue-recognition timing.

Is this enough to sour me on the stock? In terms of operating performance, I grant you, it wasn't a banging quarter. Still, I like LoJack's long-term prospects. From a historical perspective, the company's annual report shows that operating cash flow nearly tripled to over $25 million at the end of 2005, compared to $8.8 million in 2003. Capital expenditures were only $7.8 million in 2005, compared with $4.3 million in 2003. As you can see, LoJack generates some good free cash flow.

I think the rise in the top and bottom lines, in conjunction with the past cash flow record, validates LoJack as a long-term investment idea. It's a great brand that almost seems like it has the whole car-security market to itself. But that isn't exactly true, as a quick check of the company's Foolish Forecast indicates that many other entities compete with LoJack, including Sony (NYSE:SNE), Mace Security (NASDAQ:MACE), Numerex (NASDAQ:NMRX), and Pointer Telocation (NASDAQ:PNTR). The company continues to believe in its guidance for the year. With the recent sell-off, I like the current share price a lot better than the one back in February when I wrote about the company's annual earnings. If the company maybe sells off a bit more and begins to approach its 52-week low, it might be time to do some serious due diligence on this strong brand.

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Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.