Medical-equipment maker Steris (NYSE:STE) might have caused some investors to wish they had washed their hands of the stock before Wednesday's opening bell. The company announced that its fourth-quarter net profits fell more than 66% from last year. Steris blamed the loss on restructuring expenses and higher taxes, caused chiefly by ongoing routine IRS audits for the tax years 1997 through 2001.

Although the report did not initially present itself as a warm and fuzzy wake-up call, it should not have knocked an investor out of bed, either. The Ohio-based supplier of such items as surgical tables and sterile processing systems also announced full-fiscal-year 2006 results, in which revenues rose 7% to a record $1.16 billion and free cash flow hit a record high of $110.8 million.

Scrubbing out a $25.3 million expense largely related to the relocation of a Pennsylvania manufacturing facility to Mexico, we see that Steris earned net income of $23.1 million for the quarter, down $2 million from a year ago. The company's fourth-quarter 7.9% increase in revenues represented growth across all business segments, a bit higher than Wall Street's expectations.

Looking ahead to fiscal 2007, the company expects that margins will be affected for the first time by accounting for stock-based compensation. Revenue growth is anticipated to rise 4% to 8% across business segments, in line with the anticipated growth rates in its key markets and without the addition of significant regulatory approvals or breakthroughs.

A stable but not blockbuster year would be fine with me. Steris should be poised to capitalize on a world facing the needs of an aging population, as well as fears of an influenza pandemic and bioterrorism. Yet so far, the company has not done so. Its stock price has languished in roughly the same low- to mid-$20 price range for about the past four years, and earnings per share have been erratic. One wonders how long its share repurchase plan and first-ever quarterly dividend, declared last month, will placate shareholders.

Still, Steris has shown an ability to generate cash. The company now needs to continue to contain expenses while advancing across all business segments -- and that will include jump-starting its losing European business. If Steris can achieve these benchmarks, investors who stick with the company through some messy patches may someday clean up.

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Fool contributor S.J. Caplan does not own shares of the company. The Motley Fool has a disclosure policy.