Mindray Rides Hot Trends: Under the Radar

BOSTON (TheStreet) -- China, China, China. Health care, health care, health care. That's all you hear about these days. Doesn't anyone have a unique investment thesis? I do: Chinese health care.

Mindray Medical International(MR Quote) is a Shenzhen, China-based medical-device maker. The company leads the Chinese markets for hematology and biochemistry analyzers, and black-and-white ultrasound systems, based on revenue and units sold.

Mindray has boosted earnings per share for 10 straight quarters. In the second quarter, profit rose 37% to $33 million, or 29 cents a share. The company boasts a one-year growth rate of 53% for revenue and 30% for earnings.

The company's shares have surged 83% this year, making it the 11th-best performing stock in the New York Stock Exchange Healthcare Index, whose 109 members are up 13%.

The advantage of China-based research-and-development is evident in the company's operating performance. Mindray's quarterly gross margin rose to 57% in the second quarter from 52% a year earlier, helped by its low labor, material and facility costs.

Mindray's operating and net margins also compare favorably to those of U.S. rivals Edwards Lifesciences(EW Quote), Hologic(HOLX Quote) and ResMed(RMD Quote). Its 10% revenue growth for the second quarter also puts it ahead of American competitors.

The company has an impressive financial position, evident in its quick ratio of 1.4 and debt-to-equity ratio of 0.3. It has $221 million of cash and $175 million of debt, which should reassure risk-averse investors.

Valuation is a concern. The stock trades at 31 times earnings for the past year and 6.4 times book value, a hefty premium to the market and medical-equipment makers. The company's 0.6% dividend yield is less than the average for the S&P 500 Index.