Pediatrix Medical Group (NYSE:PDX), a health-care company focused on newborn, maternal-fetal, and other pediatric subspecialty physician services, reported a very nice increase in earnings last month. Per-share net income rose from $0.97 in last year's fourth quarter to $1.10 this year on a 10% increase in revenue.

But since the market tends to focus on negative things, the stock took a 7% hit the day of the announcement simply because earnings missed the analyst consensus projections by a penny. Sheesh. Talk about sensitive.

Still, investors have become accustomed to growth from the company. Although some of this growth was attributable to acquisitions, same-store sales (well, maybe "same-unit revenue" is a better term) popped up a respectable 4.9%, which included a rise in neonatal intensive care (NICU) admissions of 8.2%. For those of you who haven't experienced the panic that surrounds a premature or problem birth, the NICU is where your precious package gets rushed for critical care.

One interesting thing about Pediatrix is how it is managing its cash flow. During 2004, cash flow from operations was an excellent $123.8 million, almost all of which was free cash flow. The company used $65 million for acquisitions, and $150 million, comprised of cash and the company's credit line, to (can you guess?) repurchase its own shares. Now, normally I'm not wild about utilizing debt to repurchase shares. However, if management believes that the return on investment of those shares will exceed the interest rate on the debt, I'm all for it.

Investors interested in the health-care sector often look for the big names like Amgen (NASDAQ:AMGN), Pfizer Inc. (NYSE:PFE), and Merck & Co. (NYSE:MRK). But value often comes in smaller packages. Some investors may want to examine Pediatrix more closely, just to make certain there aren't any hidden viruses waiting to sicken their portfolios. A quick glance, however, reveals a company that may be very healthy, indeed.

Fool contributor Lawrence Meyers does not own shares in any company mentioned but uses two outstanding pediatricians at private facilities.