Sometimes life -- or at least, life on Wall Street -- just isn't fair. Silicon Labs (NASDAQ:SLAB) did its best to meet and even exceed the Street's expectations for the quarter. It laid down a rock-solid (pun intended) quarterly report, featuring a 46% spike in revenue backed up by an estimates-crushing $0.39 in profits (for a 50% increase over its Q3 2003 numbers). If the company had stopped right there, perhaps the day would have ended well for Silicon Labs shareholders, and everyone could have gone home happy.

But it wasn't to be. The company had one more thing to say before heading out the exit: "We are taking a very cautious view on the industry in the fourth quarter." And with that, Wall Street took a very cautious view of Silicon Labs' worth, slicing $370 million off the company's market cap and knocking the stock for a 21% loop. All of this happened, of course, after the market closed last night. Today, peer chip makers ARM Holdings (NASDAQ:ARMHY), Broadcom (NASDAQ:BRCM), Infineon (NYSE:IFX), and Intel (NASDAQ:INTC) are all off in tandem, though not to the extreme that Silicon Labs' shares are.

It could have been worse. Silicon Labs projects revenues of about $95 million for the fourth quarter. That's 24% less than the Street was expecting the company to sell during the period, so perhaps a 21% drop isn't so bad after all. Yeah, tell that to Silicon Labs' shareholders.

Considering how focused the market is on projections of future results, the company's other reported numbers probably aren't going to sway its opinion. But just for the heck of it, let's take a look. Free cash flow for the first nine months of 2004 came in at $44.6 million, almost double the year-ago period's $22.5 million. A back-of-the-envelope calculation of Silicon Labs' likely free cash flow by year-end, therefore, comes to about $60 million -- which would be down considerably from the trailing 12 months number cited on Yahoo! (NASDAQ:YHOO) Finance of $71 million. Put it all together and we're probably looking at an enterprise value-to-free cash flow ratio in the low 20s by year-end. That's a bargain price for a company growing earnings 50% per annum. But if the fourth quarter sees growth slow, that will cast doubt on the valuation. And Wall Street hates doubt.

Fool contributor Rich Smith owns none of the companies mentioned in this article.