"Priced for perfection."

Is there anything worse you can say about a growth stock? These three words strike fear into the hearts of anyone who (like yours Fool-y) once bought Nokia at $55, or Cisco at $60. But there's an upside to being priced for perfection: Things can work out great, so long as the company in question performs, well, perfectly.

So far, that's been the case at Russian dairy-and-juice conglomerate Wimm-Bill-Dann (NYSE:WBD). When I first scouted out the company, the stock was changing hands for $25 and change. By the time I decided Wimm had had its run last year and recommended cashing out on Motley Fool CAPS, Wimm had nearly doubled in price.

Big mistake. Huge.
Unfortunately (for my CAPS score), and fortunately (for everyone who ignored my advice), the stock has nearly tripled in price since. But as evidenced by Monday's earnings report, this is no mere momentum stock, folks. This stock is rising for a reason. Actually, several reasons. In the first half of its fiscal 2007, Wimm's:

  • Sales spiked 40% to $1.15 billion.
  • Net profits and per-share profits climbed in tandem, to $65.8 million and $1.50, respectively.
  • Gross profit margins improved in all three segments of the business, with dairy clocking in at an even 30%, beverages improving 700 basis points to 40.8%, and baby food beating them all at 45.3%. Impressive at first glance, these accomplishments astound all the more when you realize that Wimm achieved them in the face of what CEO Tony Maher termed an "extremely challenging cost environment worldwide for raw materials."

But ...
With a story this perfect, you just knew there would be a "but," right? Sometimes, when things are looking exceptional on the income statement, cash flow tells a different story. Free cash flow grew at a much lower rate of earnings during the first half of the year: roughly 8.5%.

Now, I don't mean to make too much of this issue. After all, Wimm only turned free cash-profitable less than three years ago. But, while the company may be reporting exceptional revenue and earnings growth, it may not be quite as profitable as one might think.

Six months' results are hardly enough to base a sell recommendation on, and I've learned the dangers of such short-term thinking. The company competes with immense rivals like Coca-Cola (NYSE:KO) and Cadbury Schweppes (NYSE:CSG), making its growth trends and success thus far especially impressive. But we'll want to keep an eye on the cash situation, if only to ensure that six months' cash flow results don't turn into a longer-term trend.

Follow the cash at Wimm:

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Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool's disclosure policy builds healthy bones and teeth.