One of the great things about writing for The Motley Fool is that it's an interactive experience. While we present superior investing ideas to our readers, both here on the website and in our monthly investing newsletters, our readers often write back to tip us off on potential investment gems of their own.

Recently, I had such a reader ask me to take a look at Hooper Holmes (NYSE:HH). The reader suggested that the company bore certain similarities to Motley Fool Stock Advisor selection Laboratory Corporation of America (NYSE:LH) and pointed out that it operates in the same market -- medical testing services. At the time, I took a quick look at Hooper's numbers, and finding them quite attractive despite its less-than-beautiful business, I resolved to take a closer look around earnings season. That time has now come.

First off, let's get one thing straight: Hooper does not play at the same level as LabCorp. It's simply not a threat to LabCorp's business. What's more, Hooper's primary business is providing outsourced "paramedical" examinations of applicants for life and health insurance, at the behest of the insurers. That being the case, it seems much more of a competitor to LabOne (NASDAQ:LABS) than to LabCorp. That point clarified, let's move on to the numbers.

Last week, Hooper reported its first-quarter earnings, and the news was pretty grim. Revenues increased just 3.1% over the year-ago quarter. Economies of scale helped the company boost its gross margins slightly, but increases in sales, general, and administrative expenses quickly ate up the entire gain. Result: Net profits declined 23%.

Right now, it's hard to be certain how well Hooper did from a free cash flow perspective. The company did not release a cash flow statement with its earnings report, nor has it yet filed that document with the Securities and Exchange Commission. But the fact that its cash on hand has decreased by $5 million suggests that the company did badly. Still, over the past year, the company has demonstrated an ability to produce free cash flow well in excess of its reported GAAP earnings, and that's a primary reason I became interested in the company. So I'm left to believe that the posited turnaround at Hooper, while perhaps under way, still has quite a way to go.

Even so, the company's valuation remains intriguing, given that it sells for 13 times known free cash flow and sports a cash-rich balance sheet. I suspect that if we continue to watch this putative turnaround-in-progress, we may ultimately find that we've got a real gem on our hands.

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Fool contributor Rich Smith owns no shares in any of the companies mentioned in this article.