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Sirtex Medical Limited profit soars: Will it be 2015’s blockbuster show?

Innovative cancer treatment business Sirtex Medical Limited (ASX: SRX) announced record full year sales revenues of $129.4 million for FY 2014 today, up 33.7% on the prior year. Revenue growth was strongest in the Americas up 37.4% to $96.4 million, while Europe and the rest of the world saw revenue growth between 20% to 25%.

Net profit surged 30.6% to $23.9 million, which is roughly in line with revenue growth even though the company has been investing heavily in research to develop future products.

Sirtex shares have run hard as demand for its targeted liver cancer therapy SIR-Spheres grows as medical professionals worldwide become increasingly enamoured with the effectiveness of the treatment.

Sirtex’s highly regarded chief executive Gilman Wong commented: “We believe our current growth rate is sustainable. However a positive result from our clinical studies should see an acceleration or step change in our growth.”

The hoped for step change in growth referred to may come about if the results of clinical trials the company is currently undertaking to further prove the efficacy of its SIR-Spheres treatment turn out positive. That scenario could give Sirtex the potential to become a global leader in treating cancer with its pioneering new therapies.

Indeed, in November 2013 fund manager Hunter Hall, manager of the Hunter Hall Global Value Ltd (ASX: HHV) fund, declared Sirtex to have the potential to be a $100 stock.

This on the basis that the company is able to penetrate 10% of its addressable market if its radiation-therapy treatment becomes more widely recognised. Primarily as a standard of care, rather than a treatment of last resort. With Hunter Hall’s $100 share price valuation based on future revenues of $830 million and EBITA of $565 million, Sirtex has a steep climb ahead of it based on this year’s revenues of $129.4 million.

Hunter Hall’s funds are significantly invested in Sirtex, so it’s no surprise that it’s happy to do the cheerleading. However, if Sirtex keeps scoring goals on the pitch as regularly as it has been then Hunter Hall’s cheerleading team may need some support soon enough, with fund manager Roger Montgomery a likely candidate to pick up the pom-poms.

The release of the SIRFLOX trial study data in 2015 is the next important milestone for investors to look out for and positive news could see the price rocket higher.

The market has great expectations for this business and selling for $20.43 Sirtex is trading on 48 times 2014’s earnings per share of 42.5 cents. Disappointing results in the trial studies are likely to leave today’s buyers deep underwater, although they would still own a growth stock with a bright future.

Sirtex is a great growth story but it’s priced accordingly. The key to making out-sized returns is finding the Sirtex of tomorrow not today. If you’re interested in finding out about a lesser known growth story on a far better valuation, then just enter your email below and we’ll send you the report straightaway, it’s all entirely FREE and this stock is worth knowing about!

Motley Fool contributor Tom Richardson owns shares in Sirtex Medical Limited. You can find him on Twitter @tommyr345

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