I love the concept of Motley Fool Hidden Gems recommendation Coinstar (NASDAQ:CSTR). Converting inconvenient amounts of change into convenient wads of cash is so useful. Is the concept still translating into shareholder value?

For the fourth quarter, net revenues increased 14% to $125.6 million. Operating income went up by 23%, coming in at $12.3 million. Net income was up 21% to $5.5 million ($0.20 per diluted share) compared with $4.6 million ($0.20 per diluted share) one year ago. Due to the higher number of outstanding shares, however, earnings per share remained the same. Taking away some non-cash charges, the adjusted earnings become $6.7 million ($0.25 per diluted share), which brings the growth rate up to nearly 46%.

For the full year, revenues increased almost 50% to $459.7 million and operating income jumped 29% to $47.6 million. Net income was up 9% to $22.2 million ($0.86 per diluted share) under generally accepted accounting principles, and up 28% on an adjusted basis to $26 million ($1.00 per diluted share) versus $20.4 million ($0.93 per diluted share) for all of 2004.

Previously, Rich Smith shared his concerns about margins being on the downturn after the American Coin Merchandising acquisition. Comparing fourth-quarter margins in 2005 with the previous year, there may be light at the end of the integration tunnel. On a GAAP basis, the gross margin was up 20 basis points to 33.2%, the operating margin was up 70 basis points to 9.8%, and the net profit margin increased 30 points to 4.4% (33.2%, 11.4%, and 5.3%, respectively, on an adjusted basis). Per the conference call, there's still more integration work to be done, but these improvements are a good sign.

I have to leave the numbers for a moment and become a bit intuitive. As mentioned, I really do admire the idea of Coinstar. I think the company has a bright future; so long as the tradition of the piggy bank survives, there should be demand for Coinstar's services. I especially believe in the company's strategy of converting change into gift cards; that should prove popular. I mean, why not go down to the local supermarket and get yourself an Amazon.com (NASDAQ:AMZN) voucher? It gets rid of change with no frictional costs (there is a fee imposed for turning coins into paper currency) and allows you to indulge your online shopping habit. And if the test with Wal-Mart (NYSE:WMT) is successful, one can only imagine the possibilities.

So is Coinstar creating value? It seems to be. The company continues to generate good cash flow, and continuing improvements in margins will only help. And with the enterprise value-to-free cash flow multiple sitting at 14, I definitely think it is an idea worth further scrutiny.

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Fool contributor Steven Mallas owns none of the companies mentioned. He wonders if, one day, you'll be able to convert change into Coinstar stock certificates. The Fool has a disclosure policy.