There are many different types of investment strategies and opportunities in the market if you are willing to take time and search for them. When I look through companies I look for two types. A large company with good growth potential. To define this, I look at revenue and EPS growth and I want to see at least 5 years of growth. For smaller companies I look for technology that has the potential to help a company grow and then I want to see if it has a good growth plan in place to increase its revenue.
As I scan through the medical industry, I have discovered two companies that are very diverse that I believe warrant and investor's time and effort to delve deeper into. PLC Systems (PLCSF:OTC US) is one, and the other is ResMed (RMD). Let's take a look at these two companies and what type of opportunities they present to an investor.
PLC Systems
PLCSF: OTC US
Market Cap $7.04 million
Price $0.11
Who is PLC Systems?
PLC Systems, Inc. is a medical technology company specializing in innovative technologies for the cardiac and vascular sectors. It develops and manufactures medical devices and related products for the treatment of severe coronary artery diseases in a surgical laser procedure.
Main Product to Watch
RenalGuard
This product was designed to eliminate contrast dyes that may be toxic to the kidneys when patients undergoing cardiac and imaging procedures may be "at risk." This damage can lead to Contrast-Induced Nephropathy (CIN), a form of acute kidney injury.
CIN is a form of acute renal failure caused by exposure to high contrast media during image-guided cardiology and radiology procedures. This has posed a problem for patients that are at risk because of renal insufficiency where the kidneys don't work properly.
The iodine-based radio-contrast media, or dye, used to facilitate the capture and display of x-ray images, post a challenge to the kidneys which are responsible for filtering and removing waste from the body. Patients who have a pre-existing or impaired kidney function are more susceptible to the toxic effects of the dye.
The procedure is based on something called the PRINCE study, which is a study that supports the theory that creating and maintaining a high urine output through the kidneys allows the body to quickly eliminate contrasts which naturally reduces toxic effects.
RenalGuard uses a "loop diuretic" that's prescribed by a doctor which induces a high urine output. Urine output is then measured and replaced with an equal volume of sterile saline. The results here are two eliminate the risk of under/dehydration which can lead to increased risks.
Markets
- Artech, the distributor for the company in Italy, accounts for about 50% of its sales presently.
- ACIST Medical Systems has been brought on as an exclusive distributor for France and Germany which are the largest markets in Europe. This company is a subsidiary of worldwide leader in diagnostic imaging and contrast agents-- the Bracco Group
- In March 2012 PLC announced they received approval to sell RenalGuard in Brazil and, through their Brazilian distributor, DISCOMED
- Also in March 2012 PLC received approval for sale of RenalGuard in Israel
- Japan could be the next major international market but not until at least late 2013 or sometime in 2014, following completion of the proposed 60-patient study and regulatory approval in that country.
As you can see, the company continues to expand internationally. In the United States it is still going through clinical trials with the FDA.
Revenue Projections
The projected revenue numbersfor this company look good in the next few years. While most sales come from consoles, consumables that service the installed base should continue to grow as the console base grows.
- Revenue in 2013 is projected to be $1.6 million
- Revenue in 2014 is rejected be $3 million
- Revenue in 2015 is projected to be at $5.7 million which includes a midyear entrance into the United States market.
Why Be Interested in this Stock?
Not only does this company have a good product that is a necessity in renal care for a large number of patients, but timing is everything. The product is well received and the company is just branching out into other global regions.
A small-ticket stock of this nature has the ability to grow as it continues to move into new regions and investors have the opportunity to grow right along with it. If the revenue projections hold, this is a good "ground floor" growth stock to move with.
ResMed
Market Cap: $6.73 billion
Price: $47.22
Who is ResMed?
RMD develops, manufactures, and markets medical products that manage respiratory disorders associated with sleep disorder breathing. Their products are distributed through 70 countries around the world.
Main Product to Watch
The Quattro Full Air Mask
This mask will be the lightest full air mask coming out on the market weighing in at just 3.3 ounces. This makes it 45% lighter than the leading selling mask today: the Mirage Quattro mask. This mask will be very popular because it's also simple and has four pieces washing clean.
For things like sleep apnea, positive airway pressure treatment is highly effective and has been chosen as the "treatment of choice." This type of treatment involves wearing a mask connected to a small airflow generator that delivers air at positive pressure.
Providing different treatments and products for sleeping disorders is a huge market. It has been estimated that 20% of all adults have some sort of sleeping disorder which would put it on par with diabetes and asthma as one of the most widespread disorders on the planet. Of this 20%, a number of different sleeping orders have been identified.
- SDB (sleep disorder breathing) is identified the simple things like snoring and "sleep suffocation" experiences.
- OSA (obstructive sleep apnea) is more prevalent and is described as a collapse of the upper airway despite ongoing effort.
- CSA (Central sleep apnea) is considered a lack of breathing and lack of effort as well as other forms of mixed apnea.
- 73 consecutive quarters of revenue growth
- Gross margin is at 62.4%
- Sustained EPS Growth 5 yr CAGR of 20%
- 5 yr Net Income Growth of 19% CAGR
As I have stated earlier, the core market is another reason to consider investing in this company. With 20% of the population dealing with sleep disorders (13% mildly and 7% severely), there is a large resource that has yet to be tapped into. Among the conditions in society that lead to the sleeping disorders are things like drug resistant hypertension 83%, obesity 77%, congestive heart failure 76%, and type II diabetes 72%, just to name a few. 
This market will continue to grow and not go away. It has been proven that treatment saves money! At Waste Management (WM) when employees were treated under occupational health and safety for sleeping conditions, they experienced a 37% reduction in medical costs for those who are treated the first year. With results like this the industry is not going away and ResMed is well ingrained in the occupational health and safety arena, as well as CPOD in cardiovascular issues related to sleep problems.
This company has a track record of consistent earning metrics, and I believe that is a core conviction that investors should take a look at. The whole "sleep disorder breathing" market that this company has been pioneering may just be coming out of its infancy stage. There is much more opportunity for growth for the company and the market.
In Summary
Both these companies (PLC Systems and ResMed) look like companies with good opportunities for investors. The companies are different sizes and the opportunities look good for different reasons. PLC Systems is a small company that investors who are interested in getting in on "ground-floor opportunities" and growing with the business need to look at. It is opening up new markets, and just moving into the United States with its RenalGuard product soon and revenue is expected to triple in the next 2 to 4 years. ResMed is a larger established company with a track record of solid earnings growth that could make a good investment for an income investor.
Both companies are worth your time and effort to do further research, and if you are one of the types of investors that I have described here, I would encourage you to look deeper into these companies.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.