Frequently, small-cap investors have to take a lot on faith. That’s part of investing, the potential returns rise proportionally to the risk one is taking on. Usually there’s a lot riding on growth projections for certain markets or technologies that involve a certain amount of guess work.
However, occasionally one can come across a rare gem that combines actual, hard financial results with that potential for major gains in the future if projections hold true. A situation where a company is already producing revenue and revenue growth even as the biggest potential it holds has yet to completely come to fruition.
Canadian medical device company LED Medical (LMD:CA) could be one such case. On the one hand, LED Medical is a company with a proven product in the VELScope, which has some 13,000 customers globally. On the other, the company is expanding into a portfolio of dental imaging hardware and software which includes a cloud imaging service that is on the cutting edge of dental technology. Taken together, it could mean that LED Medical is a stock that represents that rare combination of real market share in the present and the potential for real growth in the future.
Revenue Growth Shows a Strong Existing Business
LED Medical is hardly a newcomer in its industry. The VELScope is an industry leader and can play an important role in assisting in the discovery of anything from a variety of mucosal disorders to oral cancer. It’s already found a large audience, driven partially by a partnership with the Oral Cancer Foundation where LED Medical would provide dentists with a free VELScope provided they agreed to do at least three daily oral screenings using the VELcap consumable for three years.
As such, LED Medical can boast some impressive numbers in terms of revenue growth. A recent research report from Zacks, which gave LED Medical a price target of $2 a share, cited its 132% year-over-year growth in revenue as a sign that the company is doing a strong job of capitalizing on the market’s positive response to its products.
The Zacks report highlighted how it was bullish on the company, citing a FY estimate for a 70% growth in revenue by year’s end.
Expansion Into New Areas Shows Real Promise
LED Medical’s promising future, though, isn’t resting entirely on strong growth in the present. It has new products and services that are showcasing new technologies and should help the company expand into new revenue streams.
The RAYSCAN Alpha, for instance, is a next-generation 2D and 3D imaging device that offers high image quality with low radiation levels. It should offer a strong compliment to the existing imaging device product portfolio, taking imaging technology to new levels.
However, arguably the most promising offering from LED Medical could be LED Imaging Cloud. The imaging cloud works with the companies imaging hard devices should provide care providers with the ability to dramatically improve their imaging workflow management and efficiency. Dentists using the service will be able to leverage their devices even more by sharing and collaborating with greater ease.
From a company standpoint, the LED Imaging Cloud is a SaaS subscription product, providing a steady revenue stream over time to supplement the company’s equipment sales. It’s a perfect storm where the product improves the quality of care a dentist can provide and builds a lot of extra value into the company’s product offering.
If existing LED Medical customers adopt LED’s products at the rate anticipated, it could turn LED Medical into a real revenue growth engine.
A Stock For the Present and the Future
A stock in the small-cap space that is already showing real revenue growth and has a promising slate of new products hitting the market can frequently be a great find. Investors looking to take a chance on a smaller company but not interested in the sort of zero-revenue, high-growth moon shots that frequently make up the majority of the micro- and small-cap space.
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