Foolish readers -- and Foolish subscribers to the Motley Fool Stock Advisor in particular -- are still smarting from the disappointing news put out by Stock Advisor pick Possis Medical (NASDAQ:POSS) last month. As described in a very informative article by fellow Fool Jeff Hwang a few weeks back, the company's premier product, the AngioJet blood clot treatment, performed badly in a clinical trial of 197 heart attack patients.

At the same time as it released that bad news, however, Possis reassured investors that it expected fiscal 2004 earnings to come in at $0.59 to $0.60 per diluted share. (Although it slashed 2005 projections to $0.70 to $0.82 per share from the previous forecast of $0.83 to $0.96.) One month later, the company proved true to its word, as revealed in Tuesday's earnings release. Per-share diluted earnings came in at $0.60, which equates to a 50% rise over 2003 earnings after you back out a $0.48 one-time tax benefit received last year. Not bad, given that revenues increased at only about half that 50% rate.

As for the future, the earnings picture remains unchanged. Possis still thinks it will earn $0.70 to $0.82 in fiscal 2005 for a pretty broad range of 17% to 37% earnings growth. At yesterday's closing price of $17.60 per share, that translates into a forward price-to-earnings ratio ranging from 21.5 to 25. Given that Possis failed to provide a cash flow statement with its earnings release (and has yet to post a cash flow statement along with its 10-Q on the Securities and Exchange Commission's FreeEdgar site), it's hard to accurately measure the company's real cash profitability -- so as to arrive at an accurate assessment of its value.

Still, when you look at the projected earnings, compared with the growth that will be needed to generate them, three things appear to be true. On a PEG basis, if Possis comes in near the low end of its fiscal 2005 estimate, it would be slightly overvalued at a PEG of roughly 1.26. If it comes in at its high range, the PEG would drop to 0.68 -- a Grahamsian bargain price. Finally, if the analysts following this stock are right, and Possis earns only $0.76 next year, the resulting P/E (23) divided by the growth rate needed to create it (27%) again would make Possis look slightly undervalued, giving it a PEG of 0.85. Not a screaming bargain, but a bargain nonetheless.

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Fool contributor Rich Smith owns no shares in Possis Medical.