Who has played a leading role in the vast majority of the movies you've watched over the past year?

Avid. That's Avid Technology (NASDAQ:AVID). The digital media production company creates movie magic behind the scenes -- between the words "Action!" and "Cut!" -- from start to finish.

As Foolish investors, we like to look for those companies that have a commanding position in their respective markets. We look for the Microsofts of operating systems, the eBays of online marketplaces, or the Starbucks of coffee houses. In the film industry, Avid is the crowned king of its movie magic kingdom.

How prominent of a role does it play in this market? Try this on for size:

Avid's products were involved in all of the film category winners at this year's People's Choice Awards, all of the films nominated in the categories for Best Picture and Best Director at the Golden Globe Awards, and all nominees for "Best" in the categories of Picture, Director, Film Editing, Sound Editing, Sound Mixing, Visual Effects, and Animated Feature at the upcoming Academy Awards.

Just a few films you might have seen with Avid's digital fingers working in the background: The Aviator, Ray, The Polar Express, Shrek 2, the independently produced Fahrenheit 9/11, The Passion of the Christ, and, finally, my favorite director Quentin Tarantino's Kill Bill: Vol. 2. If you ask me, that's a sweep.

As an integral element among this year's most highly touted films, it's no wonder that the company knocked out a home run in its quarterly and annual results. For the fourth quarter, Avid produced revenues of $175 million -- a 37% increase over the same period a year ago. From these sales, it earned $22.5 million (or $0.61 per share) -- a 42% increase.

The record quarter enabled Avid to register 25% year-over-year sales growth to $589.6 million. Its net income for 2004 came in at $71.7 million ($2.05 per share) -- an Oscar-like performance of 75% earnings growth. Part of the earnings acceleration can be attributed to its 39.7% improvement in operating margins, which climbed to 13%, compared to the prior year's 9.3%.

Avid's fantastic industry position and operating performance invites the question as to whether this movie "star" is one to watch at your friend's house, or whether it's a buy-and-own for yourself. Looking ahead into 2005, analysts have set a consensus estimate at an attainable $3.07 in earnings-per-share. At the current price, this would give the stock a forward price-to-earnings (PE) ratio of 21. On the surface, this appears to be an awfully steep PE, but given 50% earnings growth and 20% to 25% revenue growth, its valuation may not be too far-fetched.

With Avid currently selling at a premium price, this is a good time to pop some popcorn and watch some great movies, while waiting for a better deal.

Want to read more about Avid? Try:

Fool contributor Jeremy MacNealy does not own shares in any of the companies mentioned.