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Is this company the next Nanosonics Ltd. or Impedimed Limited?

Credit: the foreign photographer

Missed the golden run in the medical device sector that is hallmarked by Nanosonics Ltd. (ASX: NAN) and Impedimed Limited (ASX: IPD)?

Don’t feel bad. There is another that could well follow the path of these two great Australian success stories with disinfection device maker Nanosonics doubling in value and the lymphedema diagnostic kit developer Impedimed jumping nearly four-fold over the past year.

I am talking about AtCor Medical Holdings Limited (ASX: ACG). In case you missed it, the stock has surged 88%, or 11 cents, to 23.5 cents this morning on news that the American Medical Association (AMA) is recommending a Category-1 code for AtCor’s SphygmoCor device, which is a more effective way to measure blood pressure and can be used to test for arterial stiffness.

A Category-1 code is the “Holy Grail” for medical device makers as this is instrumental in driving mass adoption in the world’s largest medical market.

The Category-1 code ensures users of a device or treatment seek higher rates of reimbursement from insurers, and Impedimed’s re-rating was triggered by attaining a Category-1 code.

There is a lot more room for AtCor to run given its market cap of $30 million, compared with Nanosonics’ $470 million and Impedimed’s $250 million market size.

Even if you think that the market opportunity for SphygmoCor is smaller than the target markets for the other two, AtCor should be worth more than its current market value.

Further, AtCor has achieved another important milestone recently. It delivered its first profit last month with a $400,000 first half profit on the back of higher sales, expanding margins and the favorable exchange rate.

While I believe AtCor will actively be looking at a capital raising (just like how Nanosonics and Impedimed did when their stock enjoyed a re-rating), investors shouldn’t be put off.

I think this once unloved stock that has remained under the radar of most investors will continue to head higher.

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Motley Fool contributor Brendon Lau owns shares in AtCor and Impedimed. Follow me on Twitter - https://twitter.com/brenlau

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