By MS Microcaps
Multibagger Themes: Differentiated Products – Incumbent Market Share Capture – Gross Margin Expansion – Operating Leverage – Inflection to Profitability
We found a small-cap medical diagnostics company that is growing revenue by more than 25%. The company will soon pivot into profitability as revenue continues growing, gross margins expand, and fixed costs are absorbed. This is the second medical diagnostics company we have added to our Microcap Quality Index (MSMqi). We like medical diagnostics companies, since they can achieve high valuation multiples once growth inflects.
The stock is trading well below its larger peers, and we think that as the company continues to grow revenues and turns profitable, the valuation multiples will expand.
In fact, we are projecting that earnings per share will inflect to profitability over the next 1-2 quarters. Shares are trading at a 2026 P/E of 17.3x based on our EPS estimates, however, we think it’s quite possible that the stock will trade at a P/E of 25x or higher at some point.
It’s also nice to see that a fund manager we highly respect is also very bullish on this company.
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200+ Multibaggers and counting