On Thursday night, high-tech lighting researcher Universal Display (NASDAQ:PANL) sheds some light on the fourth quarter of its 2006 fiscal year. Grab a lantern, a flashlight, or an organic LED panel, and follow me into the dark depths of this rule-breaking upstart.

What analysts say:

  • Buy, sell, or waffle? Five analyst firms track Universal Display these days. Three of them are buying; the other two are just holding. In our Motley Fool CAPS community, it's a four-star stock based on over 270 player ratings.
  • Revenues. Expect about $3.1 million of revenues, says the Wall Street crowd. That's up from $2.3 million last year, but remember that sales are very lumpy and rather unpredictable for tiny operations like this one.
  • Earnings. There should be a $0.13 loss per share, says the average analyst. Last year, the company saw a $0.17 loss per share

What management says:
In the latest earnings conference call, management spent a lot of time detailing the OLED plans and products being cooked up at companies like Seiko Epson, Samsung SDI, and Nokia (NYSE:NOK). There's an exciting set of projects underway, spanning the range between small-screen displays like cell phones and large ones like television sets. The company hopes to see some of them on the open market some time in 2007, but can't guarantee that any of them will make it this year.

What management does:
The generous gross margins give way to dismal operating numbers, because the main cost of Universal Display's business isn't manufacturing. It's a research outfit that makes its money from licensing out its patent portfolio on next-generation lighting technologies, and the R&D behind that is the real cost of business.

You can see the net and operational margins vacillating somewhere between crimson and vermilion -- in any case, deep in the red spectrum. The company is trying to commercialize its business, and making some headway there, but their technologies haven't made it into the cell phones and flat-screen televisions on the free market yet.

Margins %

6/05

9/05

12/05

3/06

6/06

9/06

Gross

93.0

93.2

92.9

93.2

92.8

92.3

Op.

(184.2)

(140.6)

(172.1)

(135.9)

(151.4)

(155.9)

Net

(195.0)

(153.9)

(155.7)

(119.9)

(129.3)

(132.1)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Like many of its fellow Motley Fool Rule Breakers selections, Universal Display is a stock for the very patient investor. I've held my shares for about two years now, and have seen the share price fluctuate between about $6 and $16, as a jittery and myopic market overreacted to every little bit of news -- good or bad. That will continue until the company can report some commercial success -- and then it's off to the races, hopefully.

So if this week's report comes out on the disappointing side, believers like me can take it as a buying opportunity. Good news would please day traders more than serious investors, as the real goodies about OLED screens on the next Apple (NASDAQ:AAPL) gadget or in the aisles of your local Best Buy (NYSE:BBY) would have been trumpeted in press releases already.

In other words: patience, young grasshopper.

Fool on:

Best Buy is a Motley Fool Stock Advisor selection, and Universal Display an official Rule Breaker. Find more of the Fool's best investment ideas with a free 30-day trial -- or two.

Fool contributor Anders Bylund is a Universal Display shareholder, but holds no position in any other companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is a bright light in dark times. A! Elbereth Gilthoniel!