So soon after resolving its patent infringement legal battles, aesthetic laser maker Cutera (NASDAQ:CUTR) finds that it's having trouble selling its lasers anyway. Last week, it reported that it would miss the first-quarter revenue and earnings projections that it had given at the end of January.

Perhaps it really shouldn't come as a surprise. The company's sales growth has been in steady decline since the third quarter of 2005, when it peaked at nearly 50% higher than the year before. Since then, quarterly revenue growth has been steadily falling. The market didn't like the latest news and hammered the stock, dropping it by more than 30%.

Year Ended 12/2006

Year Ended 12/2005













Source: Cutera's SEC filings.

Management says the shortfall is a result of lower productivity from its recent sales expansion. Though there were few details about where the decline was coming from, the company's Securities and Exchange Commission filings suggest it would be in international sales. That could be a problem, because Cutera was hoping to fuel growth through its international network.

Just more than 30% of Cutera's revenues come from international sales, primarily Asia and Japan, which account for 15% of total sales and more than half of all international sales. The Far East has been a mixed market for laser makers lately. Candela (NASDAQ:CLZR) had flat to slightly increased sales there, while for Palomar Medical Technologies (NASDAQ:PMTI) -- which settled the patent lawsuit with Cutera -- the region accounted for lower percentages of total revenues as well. In its annual report filed last June, Syneron (NASDAQ:ELOS) also reported that the Asia-Pacific region accounted for much less of its total revenue percentages than in previous years.

Considering that management said the loss of productivity was in places where the company had been expanding, that leads one to conclude that the greatest fall-off was in international sales. If Cutera was hoping to gain traction and market share by growing abroad, it looks as though it will need to slow down and take a more focused approach, as it has domestically.

Cutera has been trading at ridiculously high valuations for its earnings anyway, and even with the precipitous drop in its share price, it's still very high. Sure, on a forward basis, it seems more reasonable, but there's no guarantee that Cutera can earn even those amounts. At more than $26 a stub, this stock can still burn investors.

A 30-day trial subscription to Motley Fool Hidden Gems gives you full access to the market's best small-cap stock opportunities.

Fool contributor Rich Duprey owns shares of Candela but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.