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Charles & Colvard (CTHR) has been one of the hottest stocks on Wall Street. Four years ago, the stock was going for about $1 a share. Since then, it’s made Google (GOOG) look like a wimp. And what happens after you gain several thousand percent? Boo-yah!

Yep, Cramer profiled CTHR on "Mad Money" two weeks ago. After that, the stock got as high as $32 a share. A 3,000% plus gain in four years is always a very good thing. (Does anyone not see where this story is going?) Since you’re probably wondering what Charles & Colvard does, here’s Cramer:

Charles & Colvard’s synthetic moissanite jewels cost one-tenth the price of a diamond but are “more brilliant and more lustrous than diamonds,” he said. Moissanite jewelry is carried at more than 700 J.C. Penney stores.

Moissanite jewelry? Oh dear lord. So we’re talking about a business model that relies on that key “Kevin Federline” demographic. Jewelry shoppers at Penny’s! For the past 12 months, the company made 36 cents a share. That means it nearly got to 100 times earnings and slightly over 11 times sales. Note my use of the past tense.

This stock was priced to perfection, and perfection never came. Yesterday, Charles & Colvard said that it’s looking forward to strong growth for the fourth quarter, but next year will be “difficult to predict.” The stock is down about 30% today. Plus, there’s this gem:

Shares of Charles & Colvard plunged nearly 30 percent Thursday after the Morrisville manmade jewel maker revealed Wednesday night that it had fully vested employee and board member options to purchase 107,000 shares of its stock.

Charles & Colvard, which makes the jewel moissanite, made the move because of new accounting regulations going into effect Jan. 1 that will require companies to book stock options as expenses. Charles & Colvard will record a $54,000 expense for the fourth quarter but will avoid $522,000 in future stock options expenses, including $369,000 next year, the company would have had to take under the new rules.

The options for the 107,000 shares, which would have vested over the next three years, instead all fully vested Wednesday.

Charming, no?

Posted by edelfenbein at December 22, 2005 11:27 AM