Earlier this year, Tom Gardner recommended hair-care specialist Regis (NYSE:RGS) to Motley Fool Stock Advisor subscribers. At the time, the company's stock was at its all-time high, just shy of $40 a share. In the wake of Tom's recommendation, the stock continued to climb another 15%, cresting at $46 within two short months.

By the time of yesterday's 2004 fourth-quarter and year-end earnings announcement, however, the stock was right back below $40 after falling another 3.3% on the earnings news. In the wake of such a dramatic rise and fall, over such a short time span, now looks like an excellent time to review the company's recent performance and see whether it is measuring up to what we had hoped it could achieve.

It turns out that Regis is right on track. For instance, in February, Tom predicted Regis could generate $120 million in structural free cash flow (SFCF) in 2004. The company actually recorded more than $130 million in free cash flow (as generally defined), or $107 million in SFCF (according to my calculations). Allowing for variations in how one calculates SFCF, Regis is just about right on target.

Tom also advised that we look for Regis to achieve "mid-teen earnings and cash flow growth rates" and to continue to buy back stock. In fact, Regis grew earnings 22% over fiscal 2003. Free cash flow grew 79%. Despite some share buybacks, the company did dilute outside shareholders a bit, but 2% annual dilution seems not excessive when compared with the dilutive performances of companies such as EMC (NYSE:EMC), Cisco (NASDAQ:CSCO), or Oracle (NASDAQ:ORCL). Moreover, considering the widespread belief that interest rates are headed higher, Regis may have served its shareholders better by using its cash for other purchases: paying down some of its long-term debt and increasing its dividend by nearly 17% to $0.14 per share.

So if 2004's results were so great but the stock fell on the news, the company must have snuck an earnings warning for fiscal 2005 into its earnings release, right? Wrong. On the contrary, Regis raised its earnings outlook for 2005 to a range of $2.55 to $2.62 a share ($2.43 to $2.47 not counting planned acquisitions).

Put it all together, and there seems to be no logic at all behind the Street's reaction to Regis' performance over the last seven months, or to yesterday's results.

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Fool contributor Rich Smith owns no shares in any company mentioned here.