Amid the market's excitement surrounding artificial intelligence (AI), medical device companies -- especially those using AI to generate revenue like Nano-X Imaging (NNOX 0.45%) -- have been getting a boost. Shares of the young Israeli company are up by 43% over the past 12 months, and it hasn't even started to execute on its long-term plans with gusto yet.

So does that make Nano-X a buy right now, when there are many different stocks that are climbing? And how solid will its prospects be when the market inevitably reverses at some point? Let's dive into these questions.

A bull market can lead to inflated share prices

Bull markets can often cause investors to overlook the blemishes on young companies. Inevitably, many of these enterprises prove unprofitable or overly ambitious and ultimately leave shareholders with losses.

But there's no rule that says an early-stage company can't enjoy the upside of a bull market while getting its ducks in a row for long-term success. It's too early to tell conclusively whether Nano-X will remain a winner whenever the market settles down, but there are a few clues to suggest it might.

Its flagship product, the Nanox.Arc, is in the process of being deployed worldwide. It's approved for use in the U.S., Ghana, Nigeria, Israel, and Morocco, and the approval process is underway in the E.U. and a few other countries. Eventually, management hopes to charge customers in most of its markets for each scan they perform with their devices rather than for the hardware itself.

Doing things that way means targeting a different market than its competitors do; it's largely healthcare systems in developing countries or resource-constrained areas that would benefit most from the pay-per-scan model.

The point is that the business has a plan to avoid the entrenched competition by going where they can't or won't. And if its target customers don't have many radiologists on hand, Nano-X has them covered via its platform for AI-enabled radiology services, which also features the ability to hire human clinicians for remote consultations.

It also has a plan to offer a somewhat more traditional payment model to customers in areas like the U.S., where the upfront cost of equipment is less of a barrier. So, it won't be leaving potential revenue on the table as a result of its ambitious approach to getting its products into the hands of global customers.

Another point in favor of Nano-X is that as a result of its business model, it could one day generate a boat load of recurring revenue for very low ongoing costs. Sure, it's expensive to hand out x-ray machines for little or no money in return, and financing that process for long enough to gain a decent number of customers may require taking on a lot of debt.

But once the Nanox.Arc is installed, with maintenance and replacement part costs passed on to the customer, the picture looks a lot more favorable. Even low levels of utilization could eventually be enough to recoup device manufacturing costs, after which every additional scan would be nearly pure profit.

Wait for this one key trend to gain momentum

There's certainly a cohesive bull thesis for Nano-X stock, but it's also time for a reality check. Nano-X has not yet demonstrated that it is capable of making good on its appeal, and its business model remains more hypothetical than proven.

Trailing-12-month revenue of $9.6 million is only 4.6% higher than a year ago. At the same time, its operating margin is improving, but still very deep in the red. Both of those tidbits are somewhat to be expected, as its strategy is intended to be a slow burn, and the company is still in its early days. But if it can't show that it's close to turning a profit with its unique business model, there's little reason to deploy your capital in the stock.

Therefore, this is still a risky pick at the moment, and there is no guarantee that the approach Nano-X is taking to access overlooked markets will ever pay off for investors. On the other hand, if it succeeds with even a portion of its global ambitions, people who bought the stock today could see a tidy return.

So don't sell your old baseball cards to fund your purchase of this stock. It's perfectly acceptable to wait a while longer until its profitability starts to trend better.