Following a stellar year in 2006, Meridian Bioscience (NYSE:VIVO) kicked off its 2007 encore performance last week. From an earnings standpoint, the Cincinnati-based life science company reported another record quarter, and it should continue to impress onlookers in the months ahead.

For its 2007 Q1, the company reported a 15% increase in net sales when compared to net sales for its year-ago quarter. Meridian Bioscience also reported quarterly net earnings that exceeded its prior-year Q1 by 40%. Both the revenue and net income figures that management reported were new records for the company, and there was a 39% increase in its quarterly dividend on a year-over-year basis. The company also reaffrimed its FY 2007 guidance, which projects that net sales will increase between 9% and 13% when compared to its full-year FY 2006 results.

Meridian's working capital is more than adequate, and the balance sheet sports a current ratio of 4.5, which indicates that the company can easily meet its short-term payable obligations. While it does have the ability to borrow up to $22.5 million under its existing agreements, management has maintained a fiscally responsible approach with respect to its borrowing habits. Meridian Bioscience only has long-term debt of $1.5 million, compared to a stockholder's equity of $98.4 million.

The diagnostics industry has proven to be quite lucrative for the company, given the increased demand for cutting-edge health care. The diagnostics division of Becton Dickson (NYSE:BDX), a medical technology company, watched its revenue increase by 9% on a year-over-year basis for its most recently reported quarter. Worldwide diagnostic sales for Abbott Laboratories (NYSE:ABT) also picked up by 9% in its latest quarter.

I continue to maintain a positive outlook for Meridian Bioscience. The company's diagnostics business has seen double-digit revenue growth in both its U.S. and European markets. This momentum is likely to continue, as the company plans to launch multiple new diagnostic tests in 2007. Management also remains on the lookout for strategic acquisitions to grow the company -- and has the cash to do it.

So what does our Motley Fool CAPS community think of this small cap? Meridian Bioscience holds a five-star rating, with 99% of the players who have rated the stock showing a bullish outlook. CAPS player Mlmcgarv wrote, "This stock has continued to do two things consistently for the past three years since I bought it: outperform the market and reward its shareholders. I feel it will continue to do so over the next 5 years, as I see little downside in the company."

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Fool contributor Billy Fisher does not own shares of any of the companies mentioned. The Fool has a disclosure policy.