American Medical ( AMMD) preannounced 20% second-quarter revenue growth to $78.8 million on Monday evening, exceeding the consensus analyst estimate by 2%. The company makes a wide range of synthetic medical products that regulate pelvic function for both men and women.

About 60% of its revenue comes from surgical implants that regulate erectile dysfunction and urinary incontinence for men. According to American Medical, some 94 million men worldwide, including 52 million American and European men, are afflicted with these problems.

After the upside revenue surprise, the stock closed 3% higher Tuesday to $17.67. That's up some 19% from its June 20 lows, but also 15% below where American Medical was trading before June 5, when it announced its $678 million acquisition of medical-laser maker Laserscope ( LSCP).

With that in mind, I'm here to answer readers' questions. Should I do it? Can shares of American Medical continue to rebound, or has the stock run too far too fast?

The company said that revenue growth was strong across the board. Sales of men's health products were up 12.5% from the previous year, while women's health (42% of revenue) grew 33%. Among its products targeted toward women, American Medical makes implantable products to treat urinary incontinence, which the company says afflicts some 51 million women globally, including 17 million in the U.S. The company also treats prolapse, a bulging sensation that affects 14 million women in this country, as well as excessive menstrual bleeding, which American Medical says occurs for about 30% of the global female population.

Management did not offer specific second-quarter earnings guidance Monday, though I believe there's upside potential to the 17-cent analyst estimate, given the preliminary revenue results. American Medical is also a market leader in most of its primary markets, given the company's solid pricing power. That's an important quality for a company operating in any industry.

The Laserscope bid appears to make sense, as the company is a leader in its own right, selling equipment to remove noncancerous prostate growth. American Medical said it will likely divest the company's aesthetics business (about 30% of 2005 revenue), but the question remains: Is American Medical paying too hefty a price?

The company offered $31 a share of cash for Laserscope, representing a 45% premium to the previous day's close. The deal has yet to close, though American Medical has guided for the purchase to be accretive to future cash earnings.

American Medical is financing the acquisition with debt, including $374 million of 30-year convertible bonds it sold last month. American Medical had no debt to speak of before this financing, and the low 3.25% interest rate on the convertibles should not be a terrible burden on the company's finances.

I believe it's also worth noting that insiders have been buying the stock on the open market, showing their confidence in American Medical at the currently depressed levels. According to Securities and Exchange Commission filings, Richard Emmitt, who's been on American Medical's board of directors since 1998, bought 650,000 shares in June, nearly doubling his stake to 1.25 million shares.

So, yes, I do believe that American Medical might be attractive at current levels, even though the stock has already rebounded from its recent lows.

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David Peltier is a research associate at In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Peltier appreciates your feedback; click here to send him an email.

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