SANTA ANA, Calif. ( TheStreet) -- STEC ( STEC) appears to have had a phenomenal 2009, when its shares almost tripled and its revenue climbed an estimated 54%. In contrast, the Russell 2000, a small-cap index, gained 27% and revenues were down among tech companies, including IBM ( IBM) and Hewlett-Packard ( HPQ).

But everything was not rosy for Santa Ana, Calif.-based STEC.

The shares climbed almost ninefold to $41 by Sept. 10, before falling to $12 and losing more than $1.5 billion in market cap by December. The stock has rebounded, but investors are still scratching their heads and wondering what the heck is going on.

STEC, a maker of memory components for electronic storage devices used by businesses, is positioned to benefit as companies upgrade their computer networks. Investors have been bidding up the stock, anticipating massive growth when companies start to dole out cash to improve and expand their businesses.

That stance was dealt a big blow in November, when the company said its biggest client, EMC ( EMC), would be carrying over its inventory to 2010 and ordering fewer parts after slower-than-anticipated sales. This caused the company to cut its revenue forecast to $101 million to $103 million, or about $5 million less than analysts expected.

Was it justified for the company to lose three-quarters of its market cap because of a $5 million revision? Probably not, but it highlights the fact that growth potential is driving this stock. When its potential falls into question, the value of its stock drops.

Rumors swirling around about a potential acquisition by IBM have also played with the stock price, but there's little to suggest that any deal is in the works.

STEC looks like a steal based on earnings multiples though. The price-to-earnings ratio is at 10.2 versus an industry average of 31.8. If the stock doubled, it would be fairly valued based on these multiples. However, the stock is stuck in a volatile cycle as investors question when EMC will again call on the company to supply it with fresh parts.

The company is in no real peril because it's funded by equity, with a lofty current ratio of 7.53. The main variable is revenue growth. The company will report fourth-quarter results in early March, bringing more clarity on the stock's direction.

This is a great stock to watch in the coming weeks. Before its earnings announcement, the stock could climb in anticipation of an optimistic outlook from the company, but investors should hold off until rumors are reality. Once EMC appears ready for a second helping of inventory, STEC could take off. We rate the stock "hold." Monitor the situation closely.

-- Reported by David MacDougall in Boston.
Prior to joining TheStreet.com Ratings, David MacDougall was an analyst at Cambridge Associates, an investment consulting firm, where he worked with private equity and venture capital funds. He graduated cum laude from Northeastern University with a bachelor's degree in finance and is a Level III CFA candidate.