SonoSite's Heart Skips a Beat

The market leader in hand-carried ultrasound equipment has more than diagnosis gear in its hands. With SonoSite's (Nasdaq: SONO  ) third-quarter report on the books, we're seeing a company that is starting to accelerate its revenue growth rate on the heels of success in hospital sales and its recently introduced MicroMaxx line.

For the period, SonoSite grew its top line by 16% to hit $40.3 million. Earnings per share fell to $0.03 after a $0.09 showing a year earlier, but would have come in 33% higher if we were to back out stock-based compensation.

SonoSite's top-line spurt compares favorably to the 13% gain the company recorded through the first half of 2006. It's looking at revenue growth of "at least" 15% to 18% in its 2007 guidance, an encouraging sign for a small company that is clearly more than holding its own against the much larger General Electric (NYSE: GE  ) and aligning itself with meaty partners like Siemens (NYSE: SI  ) in Germany.

This doesn't mean that SonoSite gets a clean bill of health here. It has suffered in direct stateside sales, and there have been subsidiary breakdowns in some overseas markets. This has been offset by strength in some European markets, as well as a 30% uptick in hospital sales so far this year.

David Gardner recommended SonoSite to Rule Breakers newsletter subscribers over the summer. SonoSite's portable diagnosing equipment may not be as revolutionary as the da Vinci surgical robotic arm put out by Intuitive Surgical (Nasdaq: ISRG  ) -- another David Gardner pick for the newsletter -- but the advantages of having hand-carried ultrasound equipment should be obvious. It's often easier to get the equipment out to the patient than to get to the patient into the hospital. The rural and overseas implications are significant. SonoSite's gear is often used to show the first signs of life. Let's hope that last year's introduction of MicroMaxx proves monumental and that the "at least" top-line growth rate for 2007 proves conservative and comes attached to improving profit margins.

Feel like a Rule Breaker now, do you? Check out David Gardner's growth-stock newsletter with a free 30-day trial subscription to see if cool stocks like iRobot belong in your portfolio.

Longtime Fool contributor Rick Munarriz has seen a few ultrasound sessions take place, but they have all been of the larger, old-school variety. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.