Buy This Cancer-Killer

A couple of weeks ago, I introduced Fool readers to my nomination for the best bargain in the health-care industry -- a company that, according its fans over on the Yahoo! Finance boards, could quite possibly be the cheapest stock ever. AngioDynamics (NAS: ANGO) is its name, and killing cancer (among other things) is its game.

Many companies take many different approaches to cancer treatment. General Electric (NYS: GE) and Varian Medical (NYS: VAR) , for example, specialize in manufacturing equipment and software for radiation therapy. Pharmaceutical firms like Novartis (NYS: NVS) and GlaxoSmithKline (NYS: GSK) focus on drugs that kill cancer with chemotherapy. But AngioDynamics takes a more targeted approach. Its NanoKnife system inserts a wire directly into a tumor and then uses targeted bursts of electricity to kill the cancer dead. It's a novel solution to the problem, and one that could potentially render competing approaches obsolete.

But is it succeeding?

Killing cancer, growing cash flow
In a word: yes. Many investors were upset with Angio's first-quarter performance last week, but I think the company's working out just fine. Criticism seems to center on Angio's earning only $0.08 per share (adjusted), or $0.03 less than projected. Wall Street also wasn't pleased to see the company grow revenues only 5.6%, versus a hoped-for 8.5%. But if you're like me, and you think the real promise at Angio lies in its Oncology/Surgery business, and specifically the NanoKnife surgical ablation device, it's hard to fault Angio's performance.

O/S was Angio's strongest performer last quarter, with sales up 15% year over year. In particular, NanoKnife revenues spiked more than 100%, rising to $2.3 million, and now make up nearly 13% of this division's sales. The number of patients who have "gone under the NanoKnife" recently passed 800 -- a level at least 16% higher than where we stood just three months ago -- and shows no sign of slowing down. To the contrary, new CEO Joseph DeVivo (a great name for a health-care CEO, I might add) says that "key opinion leaders have confirmed to me the significant opportunity ahead for the NanoKnife System."

Call me an optimist, call me a Fool, but I think the opportunity for investors is just as "significant." Free cash flow at the company now stands at $32.4 million for the past 12 months -- more than 4 times reported earnings at Angio. At an enterprise value-to-free cash flow ratio of just 6.8, the stock looks even cheaper than the last time I recommended it.

Want to learn more about AngioDynamics?Add it to your Fool Watchlist.

At the time thisarticle was published Fool contributorRich Smithdoes not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handleTMFDitty, where he's currently ranked No. 302 out of more than 180,000 members.Motley Fool newsletter serviceshave recommended buying shares of GlaxoSmithKline and Novartis. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.