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Image source: Gigamon.

What: Shares of network monitoring specialist Gigamon (NYSE:GIMO) were down 15.5% as of 3:20 p.m. Friday. In a second-quarter report filed Thursday night, Gigamon beat analyst estimates and set third-quarter goals in line with analyst views. At first, shares rose on the strong report but then dropped abruptly later in the evening. Prices stayed low overnight and into the Friday session.

So what: In the second quarter, Gigamon reported adjusted earnings of $0.16 per diluted share on $51.4 million in total sales. That's up from $0.04 per share and $38.5 million, respectively, in the year-ago quarter. The results were also ahead of analyst targets, calling for earnings of $0.14 per share on sales of $49.9 million.

Looking ahead, Gigamon set the midpoint for its third-quarter earnings guidance at $0.17 per share. On the top line, management expects about $54.5 million in third-quarter sales. Here, analysts currently expect earnings of $0.15 per share on $54 million in sales -- Gigamon's guidance exceeded both of these Street targets.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Now what: So how can the company beat the Street and follow up with strong guidance, only to see shares hammered after the fact?

In simple terms, Gigamon shares were overdue for a correction.

As of Thursday's closing bell, Gigamon shares were valued at a blood-curdling 103 times trailing earnings. A net loss in the second quarter of 2014 dragged the company's trailing results down, keeping price-to-earnings ratios very high. That result has now dropped off the calculation of trailing results, replaced by a solid little profit.

So analysts and investors now have firmer ground to stand on when calculating Gigamon's true market value, and they decided to take their expectations down a little bit.

Don't cry for Gigamon owners. The stock is still up 124% over the last year, even after Friday's steep drop. Like I said, the stock was overdue for a quick adjustment.

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.