This small-cap growth stock could be a millionaire-maker

Shares in the UK's leading teleradiology services provider, Medica Group(LSE: MGP), took a dive today despite the company announcing double-digit growth for both revenue and profit in its maiden interim results. Could this sell-off be a warning for potential investors, or does it signal a buying opportunity for those with a longer timeframe?

Profits soar

Over the years, the Hastings-based healthcare services firm has grown to become the UK's leading independent provider of radiology reporting, delivering in excess of 1.3m reports a year to NHS hospitals, private hospital groups and diagnostic imaging businesses.

In its first ever interim results as a public company, the group revealed continued strong growth, delivering a 17% rise in revenues to £15.7m during the half year to June. Adjusted pre-tax profits soared by an even more impressive 42% to £3.8m, compared to £2.7m for the same period a year earlier.

Management responded with a proposed first interim dividend of 0.55p per share, payable on 27 October to shareholders registered on 29 September.

Cyber-attacks

It's worth noting the highly-publicised cyber-attacks in May, which caused major disruption to NHS systems, did not affect Medica's own systems and IT infrastructure. And the company was quick to work closely with affected clients to minimise patient impact and to ensure that it could respond to referrals as soon as these clients were back online.

Despite the strong results, Medica's share price had slumped by almost 6% by mid-afternoon, and I believe this was down to the market's elevated expectations. Trading on a 2017 price-to-earnings multiple of 31 suggests to me that the market was perhaps hoping for even more impressive figures than those announced this morning.

Nevertheless, I believe a strong brand and growing customer base leaves the group well positioned for further long-term growth.

A safer alternative?

There's no doubt that small-cap firms like Medica have the potential to deliver huge shareholder gains over the long term, but investing in these types of businesses can also involve taking on significantly higher levels of risk than with their larger, more-established, counterparts.

For those totally averse to such risks, I believe FTSE 100-listed Shire plc(LSE: SHP) could provide a very suitable alternative. The Dublin-based speciality pharmaceuticals business may not be as well known as blue-chip peers GlaxoSmithKline and AstraZeneca, but at £35.5bn is one of the top pharmaceutical and biotechnology companies in the world, with a leading position in the treatment of rare diseases.

A rare opportunity

In recent years Shire has further expanded and diversified both its product portfolio and geographical reach, yet still remains strong in the attention deficit hyperactivity disorder (ADHD) market for which it is best known.

The shares are currently trading on a very attractive valuation at just 10 times forecast earnings for 2017, giving investors a rare opportunity to buy this quality business at a knockdown price.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca and Shire. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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