Here is a possible way to look at EDIG of today. There are certainly similarity of quarter over quarter revenue growth, and just like ``Audible`` mentioned in the article,

EDIG can be a ``multibagger``...

You either have ``Hope``, and hang arround, or spew your frustrations...Put me in the group who have ``Hope`` and is willing to give the new COO a chance...

Gil...

``Barely audible

During the great tech wreck, companies such as JDS Uniphase (Nasdaq: JDSU) and Lucent (NYSE: LU) lost more than 90% of their value, and many Internet-related businesses were wiped out completely. When I looked at Audible as an investment possibility, the stock was less than $1 per share, down from the $45 range after its 1999 IPO. The business had never been profitable and was in danger of running out of money and closing its doors. It was too risky for me then, but I kept an eye on it. Over the months, things began to stabilize somewhat. Sales growth, after decelerating from 1999 through 2002, began accelerating again. The stock price doubled from its lows. Many obstacles were left to overcome, but -- because of the strength of the product, high insider ownership, and the dedication of Chairman and CEO Donald Katz -- I believed the company would get past the bad times and flourish.

In September 2003, I bought in at $1.14 per share, before the reverse stock split. This was before I joined the Hidden Gems team, and unbeknownst to me, Tom Gardner placed it on his Hidden Gems Watch List in the October 2003 issue, citing a move toward positive free cash flow, non-dilutive management, top-line growth, and other improving fundamentals.

Since then, we`ve seen seven straight quarters of positive cash from operations; five quarters of GAAP profitability; a reverse stock split (which raised my cost basis to $3.50 per share); a relisting on the Nasdaq; a deal with Apple to get content in the iTunes Music Store and to make the hot-selling iPod players ``Audible-ready``; deals with Dell, Gateway (NYSE: GTW), Hewlett-Packard (NYSE: HPQ), and Palm; and a stock price that has risen some 200%.

Also, investors have come to realize the potential of Audible`s distribution system. Netflix CEO Reed Hastings has mentioned Audible as one of the small companies he most admires. I can`t help wondering how much more efficient and profitable his business would be if it didn`t have to mail out all those DVDs. One day, when broadband becomes even broader and other technology is in place, Netflix (and its main competitor, Blockbuster) will be able to distribute movies the same way Audible offers books. Perhaps Audible, with its first-mover expertise, will even have a hand in it all.

A Gem-dandy

My point here is not to extol the current virtues of this stock. It is very volatile, will likely make more wild swings in the future, and is no longer a value play. Don`t get me wrong, though. I believe in the company`s vision and will continue to hold all or part of my position. But unpredictability is the name of the game with small, growing companies, and this high-risk investment may fluctuate wildly in the months (and years) to come. Compare General Electric`s (NYSE: GE) docile 0.8 beta with Audible`s incredible 4.0!

But for purposes of this column, I think it`s very instructive to look back at some of the characteristics that made Audible a Hidden Gem in the first place, a couple of years ago:

After a period of decline, accelerating sales growth.

High inside ownership.

Non-dilutive, shareholder-friendly, dedicated management.

Strong price appreciation potential based on Tom`s valuation method.

Underfollowed and unloved

When we find companies like this at Hidden Gems, we become very interested and dig deeper, making sure that all the pieces of the puzzle fit together. And the results so far have been excellent -- since the service began, stocks that Tom and his analysts have recommended have gained an average of 25%, vs. 7% for identical amounts invested in the S&P 500. If you`re interested in our approach and want to receive two stock recommendations each month, Tom is offering a special 30-day free trial.

This column was originally published on Nov. 19, 2004. It has been updated.

Rex Moore is currently listening to The March, by E.L. Doctorow. At the time of publication, he owned shares of Audible. Best Buy, Dell, Palm, and Netflix are Motley Fool Stock Advisor recommendations. The Fool has a disclosure policy.``