Since its spinoff from health-care firm Baxter (NYSE:BAX) back in 2000, shares of Edwards Lifesciences (NYSE:EW) have more than doubled from their introductory price of $20. The stock increased steadily until January 2005; since then, it has lingered in the mid- to low $40s. What will it take for a move closer to $50?

Edwards is the leader in heart valve therapies and devices, and also offers products to treat cardiovascular diseases, including equipment used during related surgeries and the treatment of heart-related defects.

Second-quarter earnings released Tuesday provided no clear indication of a quick upside, as overall sales rose only 3.5%. The heart-valve segment grew only 1.7%, below its historical growth of 10%, according to management. But overall gross margins did continue to improve, as they have since Edwards became an independent company. Earnings were in line with most analyst projections, but were more difficult to discern because of some one-time gains and backing out options expenses from certain calculations.

Edwards has been very good at generating operating cash flow, which has run well ahead of reported net income. And free cash flow generation has also been decent. For 2005, I estimated it at about $1.80 per share. Based on a current stock price of $42.72, and using last year's number, the price-to-free cash flow multiple is slightly less than 24. That's lower than the trailing P/E ratio, but still a bit pricey. Let's see what type of growth is baked into the stock.

Employing a two-stage free cash flow model, I estimate that Edwards must grow about 16% per year for the next 10 years to justify the current stock price. Major inputs include a 3% terminal growth rate and a 13% discount rate. In my opinion, without a more consistent track record, the growth assumptions are a bit steep. The stock could tread water for a while until cash flow growth catches up to the multiple.

Because of Edwards' heart-valve work and favorable demographics (an aging population with growing health-care needs), I'll keep the stock on my watch list in hopes of gaining a larger margin of safety. In the meantime, I have work to do on other medical-device firms to see whether they offer more compelling values. A number of analysts find Medtronic (NYSE:MDT) a good buy at current levels, and there's also St. Jude Medical (NYSE:STJ) and Boston Scientific (NYSE:BSX). The latter recently snatched Guidant away from fellow suitor Johnson & Johnson (NYSE:JNJ), which also has a sizable medical device segment.

Overall, the market is extremely competitive and highly regulated, but due to the positive demographics I mentioned, growth opportunities are substantial, and the firms for the most part throw off substantial cash flow. I'll let you know what I find.

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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. The Fool has an ironclad disclosure policy. Feel free to email Ryan with feedback or to discuss any companies mentioned further.