Rocky Mountain Chocolate Factory (NASDAQ:RMCF) is in a delicious business -- I mean, who doesn't like chocolate? But is the latest earnings report just as tasty?

The company issued its second-quarter earnings numbers, and I have to say, the answer to that last question might be no. Net sales revenue increased a measly 3% to $6.8 million. Operating income dropped 7% to $1.7 million. Net income also declined about 7%, coming in at $1.0 million, or $0.17 per diluted share.

The six-month figures show a more positive story, beginning with a revenue increase of 13% to $13.5 million. Operating income jumped 5% to $3.1 million. Net income also went up 5% to just less than $2 million, or $0.31 per diluted share.

The company blamed the hot summer for the weak second quarter. I suppose one doesn't think of chocolate on a blistering hot day, and that could have been a factor in the 1.1% decrease in same-store sales. Also affecting results were non-cash stock compensation expenses and the closure of a couple of stores.

Rocky Mountain Chocolate Factory didn't have a great quarter, and the stock closed down 3% yesterday on the news. Looking at the latest 10-K, the statement of cash flows shows that the company is a steady generator of free cash. For the fiscal years 2004, 2005, and 2006, the company generated $5.3 million, $4.1 million, and $5.3 million in operating cash flow, respectively. Capital expenditures in those same respective years were $0.5 million, $1.4 million, and $1.3 million. As can be seen, even though operational cash flow hasn't experienced growth, a lot of cash was left over after capital requirements were satisfied.

The company is hoping for growth in earnings per share to fall between 17% and 23% in fiscal 2007. The stock currently sports a relatively decent yield of 2.4% and a PEG ratio approximately equal to 1.1 by my calculation (I am using the low end of guidance to calculate that, so it should be noted that other assumptions would bring that ratio lower). The company plans on opening more stores, and it is holding no long-term debt at the moment.

If you're in a Peter Lynch kind of mood, Rocky Mountain might not be the first confectioner you think of. Well-known brand names like Hershey (NYSE:HSY), Tootsie Roll Industries (NYSE:TR), and Wrigley (NYSE:WWY) would probably be first choices for many -- to be sure, those are great companies (I myself like Hershey). But, again, even with this weak second quarter, I think Rocky Mountain Chocolate Factory is doing reasonably well in its sector. It might be worth some additional due diligence.

Indulge in a few more decadent Takes:

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Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.