For those few of you out there that follow Canon (NYSE:CAJ), you may remember that I recently wrote about the company nearing the top end of my valuation range for it. Since then the company's shares have increased another 13.5%, and I'm still holding my shares. I have an answer for that, which I'll get to at the end, but first let's take a look at Canon's first-quarter results (link opens .pdf file).

Yesterday I put out a Fool by Numbers, which shows all of Canon's sales growth, earnings growth, balance sheet, and cash flow comparisons. The one caveat to those results is that they're all in U.S. dollars. Looking at Canon on a year-over-year basis in Japanese yen -- which I think makes the most sense but isn't the most intuitive for many -- the company actually had a very good quarter, with sales growth of 9.5%, earnings per share up 16.3%, and positive free cash flow, versus last year's negative performance.

In Yen terms, the sales and profit performance was driven primarily by 20.1% growth in the company's camera segment -- where it continues to do very well against Sony (NYSE:SNE), Eastman Kodak (NYSE:EK), Nikon, and others -- and its optical products segment, where sales were up 11.3%. Canon's largest revenue-generator is still by far its business machines segment, which grew 6.3% (despite the fact that the company saw some pricing pressure in the printer and computer peripheral business). This is a competitive area where Hewlett-Packard (NYSE:HPQ), Lexmark (NYSE:LXK), Epson, and Canon itself are basically giving away printers on the very low end and making money on the ink and toner supplies.

The most impressive part of the quarter is the company's continued focus on costs and its ability to expand margins. Canon is seeing heavy price competition in the low end of its computer peripheral business, increased raw materials costs, and energy costs. I know, I know, who isn't seeing increased energy costs? the success story here is Canon's constant focus on reducing procurement costs and its improved efficiency. Having seen this dynamic work at one of my previous jobs, I know how powerful it can be, but I also know that it can't go on forever. Canon, however, is doing a better job here than its competitors.

So why am I still holding my Canon shares? The answer isn't as clever as you might think. I had initially been a bit conservative in my estimates, with my highest estimate matching the company's high-end long-term growth guidance. Given the strong performance of the Japanese and U.S. economies and the positive reception to some of Canon's new products, I adjusted my growth rates up slightly for this year and next. I also took into account that many investors value companies on a relative valuation basis and not on an absolute discounted cash flow analysis. Balancing everything out, I came to the conclusion that Canon was fairly valued. However, now that the shares are up another 13.5%, I've run into the same problem again. Don't get me wrong, it's a nice problem to have -- and one I'd love to have with every position -- but it does look like I'll be faced with making a decision again soon.

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Nathan Parmelee owns shares in Canon but has no financial interest in any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.