Shares of Emageon (NASDAQ:EMAG), which develops technologies to cost-effectively manage medical images, rose sharply at the start of the year, reaching $19 apiece. Since then, the stock has steadily slid back to $14.58. Nonetheless, despite megacompetitors and demanding customers, the company continues to grow its business.

Monday's second-quarter earnings announcement reported revenue growth of 62%, to $30 million. But this quarter's net loss of $900,000, or $0.04 per share, compares to net income of $1.9 million, or $0.09 per share, in the year-ago period. In fairness, a variety of charges contributed to that loss, including $1.1 million to integrate newly acquired Camtronics Medical Systems, and $800,000 for stock option expenses. Despite the net loss, the company generated $1.8 million in cash flows from operations.

Emageon develops sophisticated database systems for medical images. The company calls it a "patient's visual medical record repository." For hospitals under considerable financial strain, the technology helps to reduce billing errors, and its automated workflows lower the average cost per medical exam. Emageon software even lets physicians develop 2-D and 3-D views of a patient's anatomy, which can help with treatments.

The medical-imaging market is expected to grow at a healthy 15% annually through 2008 at least, according to a study by Frost & Sullivan. But in that space, Emageon must contend with hefty competitors like GE (NYSE:GE), Siemens (NYSE:SI), Philips Medical Systems, McKesson (NYSE:MCK), and Cerner (NASDAQ:CERN).

Emageon's relative youth has helped it deal with the fierce competition, letting the company build a comprehensive offering of next-generation technologies. It's also invested heavily in hiring experts to evaluate and implement systems for customers. The result is higher adoption and improved cross-selling opportunities.

A key indicator of the success of this model is Emageon's massive backlog, which stood at $170 million at the end of June, a $44 million increase from 2005. However, Emageon did not raise its guidance for the full year. Management is sticking with revenues of $122 million to $125 million, and earnings of $0.02 to $0.06 per share.

Thus, while Emageon is selling into a growth market, with a strong technology offering and a bulging backlog, the positive effects of those advantages will likely be delayed until next year or longer, as major contracts are realized over time. In the meantime, there are few other catalysts to move the stock. Given that tech is currently out of the market's favor, it may take some time for Emageon shares' potential to come into focus.

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Fool contributor Tom Taulli does not own shares mentioned in this article.