Hunters of growth in tiny packages should plan to wake up early on Tuesday. Online health information publisher ADAM (NASDAQ:ADAM), one of the inhabitants of Motley Fool Hidden Gems' patented stable of tiny gems, reports earnings before market-open tomorrow. Here's what you need to know to put tomorrow's numbers in context.

Wall Street Wisdom:

  • General consensus. There is none. No professional analysts are following ADAM. Ain't nobody here but us Fools.
  • Revenues. Consequently, there are no published revenue estimates.
  • Earnings. Nope. No earnings estimates, either.

Margin watch:
With margins like these, you'd think someone would be interested. (We sure are.) Not much has happened with ADAM's gross margins lately. But just look at its operating and net results -- they've been expanding rapidly. Even if you throw out the non sequitur of a net margin that appeared last quarter (resulting from a $5.6 million tax credit, which will artificially increase the rolling net for the next three quarters), ADAM's margins could make a Fool drool.

Margins %

6/04

9/04

12/04

3/05

6/05

9/05

Gross

79.2

79.8

79.6

79.5

79.5

80.5

Op.

9.2

12.7

18.2

20.0

21.7

24.0

Net

9.9

13.5

19.2

21.1

23.4

82.3
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 lookout:
This will be the first earnings report headed up by new ADAM CEO Kevin Noland, an alumnus of both GE (NYSE:GE) and Borland Software (NASDAQ:BORL), who succeeded company co-founder Robert Cramer at the helm back on Jan. 11. Cramer wasn't in the habit of focusing on the short term or of predicting his company's progress on a quarter-to-quarter basis. Let's hope that Noland, who's worked under Cramer for over a decade, thinks similarly.

Valuation metrics:
The longer Noland can resist Wall Street's demand that companies commit to short-term targets, which facilitate analysts' cut, paste, and republish "estimates," the more likely this gem of a company will remain undiscovered and available to Fools at a good price. It's currently selling for roughly 11 times trailing earnings and 20 times trailing free cash flow and carries essentially no debt, yet it earns a return on equity of 65%. Fools, that's a bargain.

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Fool contributor Rich Smith does not own shares of either company named above.