What does CKE Restaurants (NYSE:CKR) have to do to earn the market's love? The operator of the Hardee's and Carl's Jr. fast-food chains reported first-quarter earnings after market-close on Monday, beating estimates by two pennies on higher-than-predicted revenue. Mr. Market yawned. The company included stock-based expenses for the first time, still beating consensus estimates, but Mr. Market shrugged. It improved gross and operating margins and accounts receivable, yet Mr. Market simply sighed. The stock closed only 0.37% higher Tuesday, after spending most of the day down.

Perhaps investors didn't like that $10.8 million income-tax expense, compared to $640,000 last year. But should that be a problem for long-term investors, as hinted at in a couple of brief news reports? The company is profitable, something it couldn't claim a couple of years ago. The effective tax rate is 40%, but I would expect that to come down a bit as the company settles into continued profitability going forward. Note, however, that the majority of that tax is not cash going out the door; the company has simply begun to draw down the deferred tax asset created last quarter.

Of course, Foolish investors shouldn't pay too much attention to the day-to-day wanderings of individual stock prices. Instead, they should focus on a company's long-term results, and CKE is doing well in that department. This was the fourth quarter in a row where both gross (discounting franchise payments) and operating profit margins improved.

For me, CKE's sole caveat is its sizable stock-dilution overhang. Comparing the basic and diluted share counts shows an increase of 23.7%. Twenty percentage points of this are due to convertible notes or bonds issued in 2003 and due in 2023, while the remaining 3.7 points are due to stock options, warrants, and restricted stock. While the latter is higher than I like to see, it's not excessively unreasonable.

Convertible bonds, for those who don't know, are bonds issued by the company to raise cash. They can be converted to shares of common stock at some point before the company has to buy the bonds back (2023, in this case). These bonds became convertible back in 2004, so the company needs to keep track of their dilutive effect.

It's been several years since I've eaten at a Hardee's or Carl's Jr., so I'll have to go check out their new menus. While doing so, I'll be sure to take a copy of the company's last 10-K to read, as part of my due diligence. If CKE can keep improving margins and growing same-store sales in upcoming quarters, it might be worth a nibble. It's certainly caught my attention, despite -- or perhaps because of -- the market's irrationality.

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Fool contributor Jim Mueller does not own shares in CKE Restaurants, but that could change. (Only after the Fool's ten-day waiting period elapses, of course.) The Fool has a disclosure policy.