Grab your boards -- Volcom (NASDAQ:VLCM) shareholders rode quite a wave on its fourth-quarter and year-end results and comments on the coming year.

Volcom's fourth-quarter net income increased 7% to $7.6 million, or $0.31 per share. If that sounds a little lighter than Volcom usually delivers, part of the reason is the quarter included a provision for income taxes using a 39.4% tax rate.

Revenues increased 37.2% to $56.6 million in the fourth quarter. Note that Volcom's gross, net, and operating margins fell during the quarter. Furthermore, Volcom may have generated $11.9 million in free cash flow, but that's significantly less than the $20.1 million in free cash flow it produced last year.

The board sports apparel provider is a recommendation of our Motley Fool Hidden Gems newsletter, and closely followed there; if you take a 30-day free trial you can find a very nice synopsis of the conference call on the Volcom discussion board. At any rate, management said that it quickly noted that warm weather this winter hit demand for its winter clothing, so it aggressively cleared out merchandise in order to start 2007 off fresh (although inventories grew 22% compared to last year).

Volcom's sales to Pacific Sunwear (NASDAQ:PSUN) fared better, up 36%, but there's a hitch: Pacific Sunwear moved some shipments from 2007 into 2006, and first-quarter sales to Pacific Sunwear will be flat with second-quarter sales to the retailer down significantly. Pacific Sunwear's recent woes have proven a bit of a speed bump for Volcom, although it has dealt with the situation admirably.

Of course, Volcom distributes through other venues as well. Its merchandise can also be found in high-growth retailer Zumiez (NASDAQ:ZUMZ) as well as Federated's (NYSE:FD) Macy's and Nordstrom (NYSE:JWN). Volcom is also opening some stores of its own in opportune places.

Although news headlines touted Volcom's sluggish first-quarter guidance, the second half of the year is expected to be better. Its expansion into Europe is expected to start adding revenues in the second half of this year, and expectations are that 2008 will show a nice improvement. Also, it's added a feature on its website that shows short videos of Volcom sports events, which is already serving thousands of downloads a day. Nice.

Volcom shares got slammed last year due to Pacific Sunwear's struggles, which inspired me to give it the thumbs up in our community intelligence database Motley Fool CAPS that day; it's currently my best CAPS call by far. I've also made it clear that Volcom gives me good vibes for the long term -- I recently took the bull side in a Foolish Duel on the stock.

A slow first quarter is definitely the short term. And while I do believe Volcom is well positioned for the long term, it's trading at 26 times forward earnings, about on par with the expected earnings growth for the year, and certainly not the bargain presented last summer. It's a great time to be a Volcom shareholder, but I can see the logic behind potential investors waiting for a better price opportunity before they start rolling with Volcom.

Get caught up on Volcom with the following Foolish articles:

  • In December, we reviewed how Volcom fared in 2006.
  • Last quarter, investors were stoked.

Volcom and Zumiez are Motley Fool Hidden Gems recommendations. Pacific Sunwear is a Motley Fool Stock Advisor pick.

Alyce Lomax does not own shares of any of the companies mentioned.