While quite impressive, the 20% year-over-year increase in revenue that SonoSite (Nasdaq: SONO) reported yesterday wasn't that surprising, We were told what it was going to be last month.

But what was shocking about the earnings release was how much the increased revenue failed to trickle down to increased earnings. In fact, full-year earnings per share slipped $0.03 in 2007 compared with 2006.

Now granted, SonoSite's new tax rate has a lot to do with the decreased earnings: It ran out of net operating loss carryforwards, which boosted the tax rate for the year from 8% in 2006 to 38% last year. And operating income was up 16% for 2007.

Some of the added expenses are probably excusable. Research and development costs are up at the company, which makes hand-carried ultrasound equipment, but the expenses can be thought of as an investment in the future as the company develops new products. The other major drag on the bottom line was increased legal expenses because of patent disputes with General Electric (NYSE: GE) and ZONARE Medical Systems.

SonoSite's looking for just 15% growth in revenue this year, although that sounds more like an obtainable goal than a lofty aspiration, given last year's growth. The company is planning to launch six products this year that shouldn't compete against existing products and should help it reach its revenue goal despite increasing competition from the big guys in ultrasound -- GE, Siemens (NYSE: SI), and Royal Philips Electronics (NYSE: PHG).

I'm inclined to give SonoSite, a Rule Breakers pick, a mulligan for the year, but the company is going to have to show increased efficiency. Growth stock or not, the share price is ultimately tied to the bottom line, while revenue growth can only take the company so far.

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