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3 small cap healthcare stocks flying under the radar

It’s probably no secret that I’m a big fan of small to medium healthcare companies. With an ageing and growing population, healthcare is likely to play an ever-increasing role in our economy.

Companies offering a range of products and services to our older population are likely to see increasing demand, which should result in growing sales and profits.

1300 Smiles Limited (ASX: ONT) offers dental services and management of dental practices mainly in Queensland. The company recently made its first acquisition in South Australia, and its first acquisition in Sydney. While the company was hurt by the recent removal of a government funded dental scheme, the latest six month revenues were higher than the company’s total revenues in 2008. A new child dental benefits scheme is seeing growing revenues and the company’s dental care plan is growing members and offers a growing annuity revenue stream. Add in a strong management team with a CEO holding a large number of shares and 1300 Smiles is a quality company.

Capitol Health Limited (ASX: CAJ) owns and operates 52 diagnostic imaging clinics in and around Melbourne. Shares have dived more than 10% in the last week or so, after the CEO’s wife sold more than 100,000 shares. While no explanation for the sale has been given, there are a multitude of reasons for the sale, and investors shouldn’t over-read anything into the sale. Growth is expected to continue through organic and acquisitive measures – the last half results saw revenues climb 52%, while earnings per share rocketed up 79%.

LifeHealthcare Group Ltd (ASX: LHC) is a recent IPO and distributes a large range of medical devices, including implants and prostheses. LifeHealthcare saw revenues rise 14.7% in the last half, and above its prospectus forecasts. With strong growth forecast in its markets, LifeHealthcare is benefitting from strong industry tailwinds, and is on track to meet its 2014 financial year forecast of 8.1% growth in net profit.

Foolish takeaway

With the S&P/ ASX 200 Index (Index: ^AXJO) (ASX: XJO) up less than 1% year to date and recent falls in their share prices, now may be the perfect opportunity to take a closer look at these three growing, health care companies.

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Motley Fool writer/analyst Mike King owns shares in Capitol Health, 1300 Smiles and Lifehealthcare. You can follow Mike on Twitter @TMFKinga

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