Let's not talk about Alderwoods (NASDAQ:AWGI), OK? I just knew I should have purchased more shares yesterday, when the Hidden Gems pick dribbled downward for no reason, before an earnings call that I expected would be positive. But, dagnabbit, my investing account is in the middle of a transfer, and so I could only sit by the sidelines and wait.

And this is news worth waiting for. The death-care turnaround continued its impressive progress for the first quarter of 2005, reporting net income of $0.32 per share, versus $0.12 the year before. On a continuing-operations basis -- the firm has been shedding unprofitable facilities -- the tally came to $0.34 per share, compared to $0.28 in the prior-year quarter.

If you're thinking, "What's the big deal about 21% earnings growth? We're talking about an industry where revenues creep up at a single-digit rate," let me introduce you to a little concept called debt reduction. Alderwoods has been doing a lot of it during this turnaround period, along with strategic refinancing, and it has the potential to deliver even more earnings growth as interest expenses dwindle. For this year's quarter, after adjusting for a prior-year credit, interest paid on long-term debt decreased almost 50%.

Yes, $427 million in long-term debt remains, but Alderwoods will continue to pay this down, while having plenty of cash left over for operations and measured expansion of certain programs, like advertising and promotion, along with its Alderwoods Rooms initiatives.

Alderwoods can afford to do this because of its impressive free cash flow from operations, which totaled some $37 million this quarter. That's another impressive figure, given last year's Q1 tally of just $1 million.

Those who seek comfort in an expanding top line should look past the 3.9% total revenue increase, and keep an eye on the 17.2% increase in insurance revenue, the 7.2% increase in pre-need funeral contracts, and the 15.3% increase in pre-need cemetery contracts. Together, these growing segments now comprise over half of all revenues, and provide stable revenues in what is already a pretty economy-independent business.

For my part, I've always thought that Alderwoods was a gem. I just hope that today's 7% pop subsides a bit. I'd like this one to remain hidden a while longer, at least until I can build a bigger position.

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Seth Jayson is increasingly fond of the steady, boring, overlooked business. At the time of publication, he had shares of Alderwoods, and was planning to buy more. But he'll have to wait, in accordance with the Fool rules here. View his stock holdings and Fool profile here.