Since I used to cover so many small-cap (or even micro-cap) medical-technology companies as an analyst, I have a soft spot for the sector. And as a value hound who likes boring and essentially simple businesses, I've cast an eye on MicrotekMedical (NASDAQ:MTMD).

Forget about Intuitive Surgical's (NASDAQ:ISRG) robots, General Electric's (NYSE:GE) imaging equipment, or state-of-the-art knees from Zimmer (NYSE:ZMH) -- Microtek's main product is something that anybody can understand. They make and sell drapes. No, not the stuff you hang from windows, but the covers that medical personnel use in the operating room or during medical procedures, shielding man and machine from fluid contamination and/or infectious materials.

Let's also be clear about something with this company: It is tiny. We're talking about less than $150 million in annual sales and a similar amount of market capitalization. And though there isn't a lot in the way of robust top-line growth here, I think there's a value case to be made on the underlying cash flow potential.

For this most recent quarter, sales were flat. Health-care sales rose about 4%, offsetting a decline in royalty revenue from a non-medical contamination-control business. And though gross margins were basically flat, operating income did improve nicely (about 23%) for the quarter. I'd also note that free cash flow for the quarter was positive, though structural free cash flow was rather flattish.

I'm not going to try to play this one up as a major go-go-growth story, because it's more about finding ways to incrementally improve the business (like moving more production to China) and making selective acquisitions to broaden the product suite. Nonetheless, bear in mind that this is a debt-free company that sells a consummately disposable and essential product.

Since even small changes in my growth estimates have pretty significant consequences for my fair value estimate, I try to be conservative with this one. But even with a healthy dose of that skepticism, I come away thinking that there is at least 25% appreciation potential here. Maybe that's not enough to entice you, but it at least earns this one a spot on my watch list.

For more Foolish medical missives:

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).