Is it getting hot in here, or is it just me? Or could it be possibility No. 3? After all, the fiscal Q1 2006 earnings date for industrial laser maker Rofin-Sinar (NASDAQ:RSTI) is just around the corner.

Wall Street Wisdom:

  • General consensus. Here's something I haven't seen in a while: unanimous "buy" ratings on a small-cap stock. That's right -- five analysts follow Rofin. Five give it the thumbs-up.
  • Revenues. As for why everyone loves the stock (other than the obvious reason, that it's a Motley Fool Hidden Gems pick), it's hard to say. As far as I can tell, no analyst so much as posits a guess about what revenues Rofin will post tomorrow.
  • Earnings. Profits, however, are expected to rise 16% to $0.64 per share.

Margin watch:
Given the lack of guidance from Wall Street's professional analysts, it's more important than ever for Fools to do their own research and familiarize themselves with the company's recent performance. To that end, here are the company's rolling (also known as trailing-12-month (TTM)) margins for the past 18 months:

Margins %

6/04

9/04

12/04

3/05

6/05

9/05

Gross

38.7

41.0

41.0

41.1

41.2

40.8

Op.

12.4

15.8

15.9

16.3

16.5

15.7

Net

7.6

10.1

10.4

10.7

10.8

10.1

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish forensics:
Reviewing the above, it appears that Rofin has been on a roll for much of the past year and a half. The September quarter was the first in a long time where its margins contracted. After reviewing the firm's most recent earnings release, it seems there were two primary causes for this. First, cost of goods sold increased a bit faster than did overall sales (compressing the gross margin, which compression spilled downwards to the lower lines). Second, Rofin ramped its R&D expenditures in fiscal Q4 2005, growing them faster than it did sales.

The former "issue" deserves monitoring tomorrow. We don't want to see this turn into a new downward trend for Rofin. As for spending more on R&D, I'm all for it -- as long as Rofin can afford it. That's the kind of short-term cost that can pay real dividends in the future. In fact, you'd do better to be worried if you see Rofin cutting back on R&D tomorrow.

Rofin-Sinar is a Hidden Gems pick. Try a 30-day free trial subscription to gain access to all of Tom Gardner's small-cap gems.

Fool contributor Rich Smith does not own shares of Rofin-Sinar.