Pixar (NASDAQ:PIXR) reported earnings for the fourth quarter and full year yesterday after the market close, and the two sets of numbers seem to tell diverging tales. Let's take a look at them and see what kind of perspective we can achieve.

For the fourth quarter (which ended on Jan. 1, 2005), diluted net income decreased 37% to $0.91 per share, compared to $1.44 per diluted share reported a year earlier. Going through such items as expenses for sales and marketing, as well as for general and administrative concerns, we see that some pressures were put on the net margin. And these pressures are on top of the decline evident in total net revenues, which decreased 34% to $108.9 million, compared to $164.8 million in the previous comparable period. That quarter was driven by the success of Finding Nemo the DVD, which rode the coattails of Finding Nemo, the blockbuster box-office bonanza of the previous summer.

So, on the surface, we see a bit of disappointment with this earnings report. But hold on: The news gets a little better. For the full fiscal year, revenues increased 4% to $260.8 million vs. $250.3 million. Diluted net income increased 9.7% to $2.38, compared to $2.17 for the previous year. Pixar is definitely a company that needs to be viewed year over year, rather than quarter by quarter, because of the variable timing of its movie releases.

But let's dig deeper into the Pixar story and see what's going on here. As many of you know, Pixar has been on one heck of a run. However, one might look at it and ask, "Isn't the stock overvalued considering single-digit increases in the top and bottom lines? And, while I'm at it, what about that variability you spoke of earlier?"

Fair question. This is a great example, though, of a company that requires longer-term thinking. Consider, if you will, that Pixar is, by degrees, developing a library -- a very valuable one, judging by the success the company's films have attained so far. Also, consider that its strategy won't be stagnant; Pixar is certainly working at speeding up the development and release of its properties, which will help to make the hit-and-miss quarters more hit, less miss. And consider that Steve Jobs recently rescheduled the next Pixar movie, Cars, to be a summer release. Look how Finding Nemo fared with that strategy. That's smart thinking.

A successful summer release should increase the box-office take -- in theory moreso than a successful fall release. As the Pixar brand goes, it is gaining positive equity as the timeline progresses. For these and other reasons -- including the company's free-agent status now that Disney (NYSE:DIS) is out of the picture, thus opening the prospects for a better profit-sharing agreement -- Pixar could be considered a great bet for the long-term investor.

However, there is a bear argument to this company as well. To begin with, is every movie going to be a hit? Probably not. Will costs potentially increase faster than expected? Yes. To stay ahead of the audience-sophistication curve, technology must constantly evolve and improve. I suppose some of you might be saying, "It's the story, stupid." I agree -- but, audiences want eye candy, too.

Are competitors like DreamWorks Animation (NYSE:DWA), Fox (NYSE:FOX), and Time Warner (NYSE:TWX) going to sit idly by and let Pixar keep the computer-animated market to itself? They never have and never will. Would you buy a company that routinely trades at an overvalued level because it has a premium CEO factor? After all, CEOs come and go. Sure, the odds of Jobs leaving are long, but the future can surprise any of us at any time. And what about the up/down earnings pattern? A long-term investor could, understandably, ask herself why she should settle for such instability.

There's no question that Pixar has been a successful stock and company. There's also no question that the higher the price of the stock, the more risk you take when you buy it. Processing both the bull and the bear arguments (you know, there's an idea for you, Mr. Jobs -- a cartoon about actual bulls and bears trading on their version of Wall Street), I think the net conclusion is that Pixar is a buy, though patient investors may wait for a pullback. And if you do decide to buy (based on your own due diligence, not just my opinion), be prepared to accept the short-term volatilities that will -- not might, but will -- result.

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Fool contributor Steven Mallas owns shares of Disney, but none of the other companies mentioned.