Has the

Lawson Software

(LWSN)

train left the station? Not necessarily.

Despite a run-up in share prices of more than 100% in the past 12 months -- much of it since August -- the business applications vendor may still have some upside. Moreover, the company has a tough quarter coming up, and that could depress the stock to a level that would make buy-siders more comfortable.

On Thursday the enterprise software applications company gave investors more evidence that its vertical strategy is starting to pay off. Lawson reported that a 25% jump in software license sales helped turn a year-ago loss into a 3-cents-a-share profit in the fiscal first quarter.

The company posted net income of $3.2 million on sales of $88 million in the August quarter, compared with a net loss of $1.9 million, or 2 cents a share, on sales of $87.4 million a year ago.

But the big news on the positive side was license revenue, a key indicator of new business, which rose to $22.7 million from $18.1 million in 2003. And pro forma operating margins reached 6.5%, the highest level in five quarters.

The company's guidance for the second quarter was conservative -- forecasting revenue in the $80 million-plus range, seasonally lower license revenue of about $19 million, a pro forma loss of about 3 cents, or 6 cents including items. And that pushed the stock down nearly 10% on Friday, losing 82 cents to $7.44.

Earnings will be held down by expenses related to a series of acquisitions the company has undertaken and its plan to develop a research center in India.

"Lawson is looking at some heavy expenses in a trough earnings quarter," said US Bancorp Piper Jaffray analyst Tad Piper. Nevertheless, Piper maintained his "outperform" rating and $9.50 price target.

The St. Paul, Minn., company sells application software to businesses in health care, government and retail; it competes with

PeopleSoft

(PSFT)

and

JDA Software

(JDAS)

, among others.

"We believe there are continued signs of improvement in Lawson'sbusiness and expect to see revenue and margin improvements (near-term dilutionaside) in the coming year. We believe the stock remains attractively valued at 1.7 timesEV/CY2004 sales," he wrote in a note to clients. Piper Jaffray has, or expects to have, a banking relationship with Lawson.

Also bullish was Lehman Brothers analyst Neil Herman who said "the shares remain cheap at 1.6 EV (enterprise value) to trailing revenue" and raised his target from $8 to $9.

Herman said he believes Lawson's business, and business in the software sector in general, is picking up, but in the near-term Lawson will be focused on integrating its recent acquisitions. "In other words, we believe there are near-term risks as well as longer-term opportunities." Lehman Brothers has a banking relationship with the company.

Paul Kedrosky, a hedge fund adviser and

Real Money

contributor, has boosted the stock in the past, but now he thinks it may be a bit pricey. "I like LWSN a lot, but I'm nervous at these levels, mostly based on price. I sold most of my holdings. I'm thinking I'll get to buy it back at lower levels in the next few months."

Kedrosky also hinted that some in the market expect the company to be sold. "The bull case is increasingly that Lawson gets bought, and I never like that as a core holding rationale," he said.