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NEW YORK (CNN/Money) - Taser's growth has been electrifying, but can the controversial stun gun manufacturer keep it up?

The Scottsdale, Arizona-based company has seen its revenue nearly quadruple in three years as police departments around the country snatched up Taser's "less-lethal" weaponry. And there is a huge potential market to be tapped.

The company reported a fourth-quarter profit surge of 77 percent on Tuesday, but fell short of Wall Street expectations. Analysts had expected 10 cents a share, according to First Call, rather than the 8 cents a share the company reported.

Despite heady growth, investors have pulled the plug on the stock. After surging more than 360 percent in 2004, shares of Taser (Research) have plunged nearly 50 percent this year.

Why has there been such a huge pullback?

The Securities and Exchange Commission launched an informal inquiry of Taser last month regarding the safety of its product. The SEC is also looking into the timing of a sale of stun guns to a distributor at the end of last year.

Taser says it has cooperated with the SEC and has maintained that its stun guns are safe. But lawsuits against the company are piling up, based on investors' claims that the company has not been forthcoming with the potential dangers of its product. In addition, the company warned in January that there may be a slowdown in orders during the first half of this year.

So have the best of times for Taser already come and gone or has Wall Street overreacted and made the stock a decent value?

Taser has already posted amazing levels of growth and there still are plenty of opportunities. The company said its market penetration, based on the number of police officers nationwide who use the product, is under 10 percent.

In addition, Joe Blankenship, analyst for Source Capital Group, said the company has strong potential in Great Britain, which recently approved use of Tasers for specially-trained officers. The weapon is also undergoing tests in France, and the U.S. military has mounted Tasers on M-16s for some of its soldiers in Iraq.

But there are problems. For one, Taser is starting to face more competition from companies including Stinger Systems.

And though growth still is expected to be strong in 2005 (40 percent sales growth and 44 percent earnings per share growth), the pace is slowing down and investors seem more concerned about news of delays in orders.

Investors are also clearly worried about safety risks and a wave of negative media attention as well.

Some suspects have died in police custody after being shocked with the weapons, though Taser proponents have maintained that the fatalities are due to suspects' high toxin levels and faltering health conditions, and not anything wrong with the stun guns.

Nonetheless, the company is facing lawsuits filed on behalf of investors who claim they were not properly notified of the product's potential dangers. The announcement of the SEC's inquiry certainly didn't help matters.

As a result, Brian Ruttenbur, an analyst with Morgan Keegan, said one major risks the company faces is that litigation expenses and possible settlements could hurt earnings.

At first glance, Taser may finally seem like an attractive stock. Shares, currently priced at about $17.16, are about 50 percent below their 52-week high.

But don't be fooled. The stock trades at 35.5 times 2005 earnings estimates, a steep valuation considering all the risks. All four of the analysts covering the stock have it rated a "Hold", according to Thomson/First Call.

Plus, a large number of professional investors are betting that the stock still has more downside. The number of Taser shares being held short was 21.1 million as of mid-January. While that's down from 30.1 million shares a month earlier, short interest still represents a whopping 40.7 percent of the company's available float.

So if Taser has more bad news for investors in the coming months, the company's stock performance won't be all that stunning.