The last time Rule Breaker Sigma Designs (Nasdaq: SIGM) reported earnings, the stock traded at five times forward estimates, if you backed out a substantial debt-free cash hoard from the market cap. Now the media-processor expert is back with another stellar report and even more cash in the bank, but the shares keep trending down. These days, you can still get this growth stock for an astounding 4.7 times forward earnings, ex-cash.

It's only a matter of time before Sigma breaks through to a more reasonable valuation, in my opinion. The IPTV set-top box market is still in its infancy, with AT&T's (NYSE: T) U-Verse as the leading service provider. But IP-based programming is the best way forward, and the refreshed DOCSIS 3.0 standard for pure cable systems is leaning in the same data networking direction. Sigma's IPTV processors are easily adaptable to DOCSIS 3.

Despite all that, the inevitable explosion hasn't happened yet, and the market loves to ignore stocks with small earnings. In the second quarter, Sigma booked $0.05 million of GAAP net income on $73.3 million in revenue, a 43% year-over-year sales gain, but a big step back from the $4.8 million of income reported in the prior-year period. Earnings are lumpy as this fast-growing business balances out the many moving parts of a growing business model.

Sigma's media processors have to compete against offerings from Broadcom (Nasdaq: BRCM) and Texas Instruments (NYSE: TXN). In battling these giants, Sigma has decided to place particular focus on the MIPS (Nasdaq: MIPS) processor architecture, instead of the more common ARM Holdings (Nasdaq: ARMH) solution.

This is important, because MIPS claims the No. 1 market position in digital media products, including Blu-ray players, connected TV sets, and -- yep -- IPTV set-top boxes. And as next-generation wireless technologies WiMAX and LTE become ubiquitous over the next couple of years, MIPS chips like Sigma's systems-on-a-chip have a window of opportunity to move into cell phones, too. So why not start working on Android support right away, both to enable Android-based media boxes and to gain experience with the platform ahead of a possible handset push? Oh, wait, Sigma already does that, too.

Just looking at the numbers, it's easy to miss Sigma Designs' immense growth opportunity. But learn a little bit about the business, and you're suddenly staring a can't-miss investment right in the face. If nothing else, you could take a quick CAPS position on Sigma -- or any other stock -- to help you track its progress.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Sigma Designs is a Motley Fool Rule Breakers choice. Try any of our Foolish newsletter services free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.