At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." The pinstripe-and-wingtip crowd is entitled to its opinions, but we have some pretty sharp stock pickers down here on Main Street, too. And we're not always impressed with how Wall Street does its job.

Perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. But in "This Just In," we don't simply tell you what the analysts said. We also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

Is this the cheapest stock ever?
Last year, I asked Fool readers whether AngioDynamics (Nasdaq: ANGO) was the cheapest stock ever. It was priced at 10 times free cash flow, but Wall Street had it pegged for uninspiring growth; the answer wasn't obvious. As it turns out, I wasn't the only investor looking at Angio -- and I'm not the only one saying it's a bargain today.

Last night, AngioDynamics wowed the Street with fiscal 2011 earnings news that beat by a penny. This morning, ace med-tech investor Canaccord Genuity came out with a glowing report on the stock and upgraded Angio to a full-blown "buy" rating. Why? The answer's not exactly obvious. For one thing, AngioDynamics experienced essentially no sales growth at all last year. Gross margins declined by 50 basis points, and net profits dropped by a full third, to $0.33 per share. Worse, management held out the possibility of zero profit growth in fiscal 2012, warning that while earnings might rise to $0.41 per share, they could just as easily stay stuck at $0.33.

Always darkest before the dawn
I think you'll agree that if that's a beat, I'd hate to see what happens when Angio misses earnings. So why is Canaccord optimistic? For one thing, the analyst believes that most bad news is already priced into the stock. Angio's already lost its "LC beads business." It's already suffered from, and is dealing, with "supply chain issues in vascular." Its CEO has departed. From here on out, it's hard to see things getting any worse.

To the contrary, Canaccord thinks fiscal 2012 is the year in which AngioDynamics finds itself a new CEO -- and probably a good one. Canaccord notes that according to its sources, "strong demand exists for the position." While the analyst doesn't discuss the rumors of a takeover by growth-hungry Johnson & Johnson (NYSE: JNJ) or Covidien (NYSE: COV) -- rumors we were hearing around about this time last year -- Canaccord believes the opposite could be true: Angio might get itself an acquisition or two to juice its own growth rate. But just to be safe, Canaccord says it's positing below-guidance numbers for Angio, leaving plenty of room for an upside surprise.

"By the pricking of my thumbs, something [wonderful] this way comes"
From where might such a surprise hail? Well, Angio's novel use of targeted electrocution to kill cancer cells with its NanoKnife device appears to be gaining traction. Canaccord notes that Angio filed "on time" for FDA approval of the device in treating pancreatic cancer. The company recorded $7.1 million in sales for the device last year (3% of total revenues), but that number's set to double in fiscal 2012.

Indeed, a double does seem likely -- and maybe even conservative. Management reported that after treating 151 patients with the device last quarter, the total number of patients who've gone under the NanoKnife stands now at 689. That's twice the tally from nine months ago, when I last took a close look at Angio. It's well over 100% year-over-year patient growth, and that number's likely to accelerate further as Angio equips more and more doctors with the device (seven new commercial accounts were added in Q4.)

As I've mentioned before, it's the promise of NanoKnife to reinvent the treatment of cancer that first attracted me to AngioDynamics. The idea of directly targeting cancerous cells for destruction, rather than poisoning the whole body in hopes of killing a few rambunctious cells, appeals to me. And I admit, the rocket-ship growth of NanoKnife's usage is a big part of why I like the stock today. But still, with the NanoKnife making up 3% or even 6% of Angio's total revenues -- and being a currently unprofitable part of that business -- an investor would be foolish (small "f") to buy all of AngioDynamics just to get hold of this one product. We have to value the company as a whole before deciding whether it's a buy at today's price.

So let's do that.

Valuation matters
Based on its most recent numbers, AngioDynamics now sells for 47 times trailing earnings -- which sounds like quite a lot. Much larger medical-device companies armed with much more robust free cash flow, such as General Electric (NYSE: GE) and Medtronic (NYSE: MDT), routinely sell in the low to mid-teens for P/E. Even fast-growing Intuitive Surgical (Nasdaq: ISRG) -- fully as disruptive a business as AngioDynamics, but more successful at it -- costs only 36 times earnings.

But there are two problems with this too-simplistic P/E valuation technique: It ignores Angio's free cash flow -- $30.9 million, or nearly 4 times reported GAAP earnings -- and it ignores the $112 million in cash Angio carries on its balance sheet. Factor those two numbers into the equation, and Angio looks quite a bit cheaper at an enterprise value-to-free cash flow ratio of just 7.7. Cheap enough, in fact, that even if the company just meets Wall Street's consensus expectation of 10% long-term earnings growth, I think the stock's a buy.

Foolish takeaway
Given a low price, I'd probably be willing to buy AngioDynamics based on its legacy businesses alone. Throw the disruptive profit-making potential of 100%-grower NanoKnife into the equation, and this stock's a no-brainer. Maybe it's not "the cheapest stock ever," but it's definitely cheap enough for me.

Fool contributor Rich Smith owns no shares of any company named above. Yet. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 567 out of more than 170,000 members.

The Motley Fool owns shares of Medtronic and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Covidien, Johnson & Johnson, and Intuitive Surgical, and other Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson.

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