Late last week, Virtual Radiologic (NASDAQ:VRAD) went public and investors piled onto the stock, which rose about 47% before falling 12% today. In light of the rockiness with tech-stock bellwethers like Cisco and Google, it was an impressive performance. So why all the excitement?

Virtual Radiologic has built a platform that allows for remote interpretation of CT scans, ultrasounds, and MRIs. The company has 106 radiologists on retainer, who are located at their homes or any locations they want. No doubt the convenience is a big attraction. Additionally, the radiologists are offered equity ownership in the company.

Virtual Radiologic has a highly secure network and is based on complex proprietary software. More importantly, the company strives to find ways to make things easier for its radiologists. For example, Virtual Radiologic wanted to build a better navigation device that would improve the analysis of diagrams. As a result, the company looked at Microsoft's (NASDAQ:MSFT) Xbox and other gaming platforms to get more insights on designs.

There are definitely strong trends in favor of Virtual Radiologic. First, there continues to be increasing demand for diagnostic imaging services because of improved technologies and the country's aging population. Frost & Sullivan estimates that image procedure volume will grow 15% per year to 500 million by 2009.

Next, there is a shortage of radiologists. In fact, according to a study from the American Journal of Roentgenology, the number of radiologists in practice is expected to grow less than 2% per year.

The upshot is lots of growth for Virtual Radiologic. For the first nine months of 2007, revenue spiked 67% to $63.3 million and net income went from a loss of $1.8 million to a positive $2.1 million.

Competition? Actually, there is a direct competitor, NightHawk Radiology Holdings (NASDAQ:NHWK). That company grew its revenue at 79% in Q3 and trades at about 4.5 times revenue.

Interestingly enough, Virtual Radiologic's multiple is about the same. However, given the shortage of radiologists and the growth of digital imaging, there should be room for several players in the sector. So for Foolish investors, Virtual Radiologic is certainly worth a look.

For more Foolishness:

Microsoft is a Motley Fool Inside Value pick, while NightHawk has been recommended in our Hidden Gems Pay Dirt service.

Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. The Fool has a disclosure policy