"Good stock. Have a bone," said Mr. Market. Then he promptly whacked VCA Antech (NASDAQ:WOOF) over the head with a rolled up 10-K. (Ouch! That's the big one!)

Last week, my best guess as to Antech's likely fourth-quarter earnings news went something like this: "Going forward, it looks like the dynamics of the business are trending towards the more profitable lab business contributing a smaller and smaller proportion of revenues (and profits), while medical technology and animal hospital take on more important roles as the firm's growth drivers."

In fact, something close to the opposite happened in Q4: Unsurprisingly, medical technology grew fastest of the firm's three segments, with sales up 41.1% versus last year's Q4. (As the smallest business unit, even small absolute gains translate into huge growth as a percentage.) The next fastest grower, however, was not the animal hospital, but the laboratory business. Labs revenue grew half again as fast as companywide sales growth at nearly 17.6%. Animal hospital grew 8.5%.

As a result, my fears over margin compression appeared to have been allayed, at least in the short term. Likewise Mr. Market's fears, as investors promptly bid the stock up 8% in response to the news. And yet, today, less than a week after earnings came out, the stock has given up those gains in their entirety (as of this writing). Why?

Round up the usual suspects?
Nope, that won't work this time. Antech beat analysts' earnings expectations as well as their expected revenues for the quarter. Nor is forward guidance the problem. The company raised guidance for both 2007 earnings and revenues by about 1.5%, to $1.29 per share, and $1.06 billion, respectively. Even better, management predicted the opposite of my own prediction coming to pass as the year progresses. It expects higher-margin sales from its laboratory segment to grow roughly twice as fast as its lower-margin animal hospital revenue, 9% vs. 4.5%.

Nor is free cash flow the problem. Although it's true that this metric lags GAAP earnings at Antech, that's because the firm continues to be in a growth phase, plowing nearly all of its cash profits back into building the business. That said, free cash flow (which I define as operating cash flow minus capital expenditures, minus money spent for business acquisitions for an acquisitive company like Antech) improved markedly this year, emerging from last year's $3.2 million in red ink to reach $41.1 million in 2006.

No, when all is said and done, it seems to me the whole reason Antech's stock has given up its post-earnings gains lies with the direction of the overall market today. All major indices are in the red, and Antech's stock is following them down -- meaning investors now get a second bite at this dog biscuit. My advice? Don't play dead. Fetch.

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Fool contributor Rich Smith does not own shares of any company named above. The Fool's disclosure policy is the one with the waggly tail.