A commentary by James Early in April outlined the investment case for Headwaters (NASDAQ:HDWR). It is a company that turns coal trash into cold cash -- with a nanotech wildcard. Well, that was April.

Since April, the company's diversification plan led to acquiring stone veneer vendor Eldorado Stone in June, certain South Texas concrete block assets of Southwest Concrete in July, and molded siding company Tapco in September. Headwaters, previously known to investors for its fly ash and synthetic fuels industry products, now has products as close as your local Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) home improvement center.

All this diversification has not derailed the company's profitable growth. In its fourth quarter, Headwaters' revenue ascended 86%, and net income skyrocketed 43%. If you exclude the growth caused by 2004 acquisitions, net income still rose a solid 25%.

All the acquisitions have caused long-term debt to balloon from $104 million to $923 million. Total debt-to-equity stands at a very tall 316%. Yikes! The company's fly ash makes concrete materials harder -- a good thing. This level of debt is like equipping a sprinter with cement shoes -- making for a real challenge.

Before dismissing the company's prospects, take a look at its exceptionally clear and information-packed press releases. Headwaters doesn't just announce it acquired a company -- it provides the rationale for the acquisition. Shareholders, if they disagree with the direction, have the information to do a stage-left exit.

That clarity of communications also goes into its 2005 forecast -- which breaks earnings and revenue growth rates down quarter by quarter. Earnings, forecast at $2.00 to $2.10 a share, work out to a modest 16 price-to-earnings ratio.

While construction materials company Lafarge North American (NYSE:LAF) trades at 13 times 2005 estimated earnings, its growth rate doesn't come close to Headwaters' -- nor does it turn coal trash into cold cash while offering technology exposure to synthetic fuels and nanotechnology. It also explains why Headwaters is up 80% from where it was 52 weeks ago.

Fool contributor W.D. Crotty owns stock in Home Depot -- a place where he has tripped over Headwaters' product.