"Under-the-Radar Stocks" is a daily feature that uncovers little-known companies worthy of investors' consideration. Check in at 5 a.m. every morning to find out about stocks that tend to beat their bigger brethren.The Vanguard Health Care Index has declined 1% this year as investors are more interested in buying beaten-down technology stocks. The Nasdaq, a barometer for tech shares, has increased 15%. But some health-care companies are poised for strong revenue and earnings growth. In addition, as the stock market rebounds and credit gets easier, micro-cap health-care suppliers like the two listed below may become acquisition targets. Allen, Texas-based Atrion Corp. ( ATRI) develops and sells products and components for the health-care industry. Products range from cardiovascular to ophthalmology, and the company also makes a line of non-medical components for aviation and marine safety. TheStreet.com Ratings has given Atrion a "buy" rating for two years. During the first quarter, revenue rose a marginal 1.8% to $25 million, but earnings per share climbed 13% to $2.06. The company managed to improve upon its strong financial position by adding $16 million to the cash balance while retaining its debt-free status. Looking at peer valuation in the health-care-supplies industry, Atrion is trading at a discount based on earnings, sales, book value and cash flow. With a price-to-earnings ratio of 14.91, Atrion is 27% cheaper than its average peer. The stock, which offers a 1% dividend yield, has increased 22% this year. Like Atrion, Merit Medical Systems ( MMSI) is a top-rated micro-cap. The South Jordan, Utah-based company, which manufactures disposable medical devices for diagnosis, radiology and cardiology, was upgraded to "buy" on May 27 after posting strong first-quarter results. Merit Medical Systems has achieved year-over-year earnings per share growth for nine consecutive quarters.
First-quarter revenue increased 9% to $58 million, and EPS ascended 27% to $0.19. The company retained its debt-free position, but has burned through $7.1 million of cash since the prior year's first quarter. Nevertheless, it has ample liquidity. Shares of Merit Medical Systems are cheap on the basis of sales and book value. But a price-to-earnings ratio of 21.1 indicates a premium relative to peers. Despite the pricy cost, Merit Medical Systems is attractive because it's fundamentally strong, having grown during the recession. The stock has declined 9% this year. The company doesn't pay dividends. TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.