Under the Radar: Healthy Haemonetics - TheStreet

"Under the Radar" is a daily feature that uncovers little-known companies worthy of investors' consideration. Check in at 5 every morning to find out about stocks that tend to beat their bigger brethren.

UnitedHealth Group

(UNH) - Get Report


Quest Diagnostics

(DGX) - Get Report

aren't the only health care stocks for investors seeking either defensive strategies or long-term plays.

But small-cap companies sometimes offer better returns. As baby boomers age, demand for health-care supplies will increase and so will the stock prices of well-positioned companies. Here is a lesser-known blood-management company with superlative fundamentals and growth potential.

Braintree, Mass.-based


(HAE) - Get Report

is a global leader in blood processing. The company offers services and devices to hospitals, blood banks and plasma collectors. Global demand for blood is increasing, yet the transfusable supply is stagnant. Haemonetics' goal is to help hospitals maximize the efficiency of transfusions at an optimal cost.

It's been proven that there is a direct correlation between the quantity of a transfusion and the likelihood of serious complications. Consequently, Haemonetics has developed a swath of devices and services designed to minimize blood loss in patients and determine, when appropriate, the ideal transfusion quantity. The company's offerings will be in demand as baby boomers age, operation volume surges and our health care system attempts to maximize the efficiency of its blood supply.

Haemonetics posted an impressive fiscal fourth-quarter. Its revenue ascended 6% to $152 million as net income and earnings per share inched up to $14 million and 53 cents, respectively. Although the company's operating margin deteriorated from 16% to 14%, its net margin remained strong at 9%.

Haemonetics has a pristine balance sheet, with more than $156 million of cash reserves and just $6 million of debt obligations. The company has boosted its cash balance 17% since the prior year's quarter and cut its debt load in half. A debt-to-equity ratio of roughly zero and a quick ratio of 2.9 demonstrate Haemonetics' fiscal prudence. We give the company a financial strength score of 7.9 out of 10, which compares favorably to our "buy"-rated average.

The company has achieved eight consecutive quarters of earnings growth. Consequently, its stock is expensive. Haemonetics trades at a price-to-earnings ratio of 25, making it 24% more expensive than its average peer in the health-care supplies industry. However, on the basis of sales, book value and cash flow, the stock is vastly cheaper than its peers.