I've always thought Natus Medical's (NASDAQ:BABY) CEO Jim Hawkins was an awesome value investor. His team was able to grab smaller competitors at 1 to 1.5 times revenue even though his company was trading well above 3 times revenue.

But after hospital capital spending collapsed -- and Natus Medical’s share price followed -- the company is now trading at about 1.4 times last year's revenue. While organic growth this year is nonexistent, acquisitions from last year should help push revenue up 2.6% to 5%.

Will someone come along and snatch up the Motley Fool Hidden Gems pick? Probably not. While it's been knocked down by a lack of growth, so have many of its competitors. It's probably still not the cheapest thing on the market, and I expect Hawkins to be buying, not selling -- the company has $57 million in cash and short-term investments and another $25 million in credit available.

While Natus is waiting for its next big move, it's doing everything it can to boost the bottom line. The company thinks the restructuring it did last year should save at least $2 million in operating costs per year. That would be pocket change for a large medical-device maker like Johnson & Johnson (NYSE:JNJ) or Boston Scientific (NYSE:BSX). But Natus is a small cap that only had $25.5 million in operating income last year. Adding $2 million to that is a substantial boost.

While capital spending has slowed, Natus Medical still has a captive audience for all the disposable products used by the machines it's already sold. Like Intuitive Surgical's (NASDAQ:ISRG) robots, and Microsoft's (NASDAQ:MSFT) Xboxes, Natus' installed base will still drive revenues. And it hopes that it'll be able to increase margins on its disposable products. Gillette's razor-blade model strikes again.

Growth at Natus might be on the light side this year, but the eight acquisitions it's made over the last four years have proven that the company can make good use of its capital.

More small-cap Foolishness:

  • Natus gets five stars from CAPS players.
  • This one is worth waiting for.
  • The next stock you should buy.

Big returns often come in little packages. Find out why the Hidden Gems team picked Natus to soar above the rest by grabbing a 30-day free trial of the small-cap stock recommendation service.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson is an Income Investor recommendation. Microsoft is an Inside Value selection. Intuitive Surgical is a Rule Breakers pick. The Fool's disclosure policy was acquired in a draft after the will was already taken.