Clean up with Tristel

The company's main technology is its patented chlorine dioxide formulation, a highly effective disinfectant that can kill C.difficile spores in 30 seconds. In addition to hospitals - which account for 86 per cent of turnover - Tristel's sprays, gels, foams, liquids and other products are used to clean surfaces and instruments in pharmaceutical clean rooms and veterinary practices. A skin-friendly product has also been developed and is being rolled out, pending some regulatory hurdles.

Tristel floated in 2005 and now boasts real sales momentum. It has generated record revenues in each of the past four six-month trading periods, and in the final half of 2014 grew sales by 15 per cent to £7.4m, in line with a sales goal of £20m by 2016-17. In the UK, which accounts for two-thirds of revenues, the key to sales growth is improving ties to hospitals' infection control teams and targeting specialisations such as cardiology and ophthalmology, where adoption of Tristel's products is less widespread.

Increased scale has helped widen net margins, which are forecast to increase by 150 basis points to 15 per cent in the financial year to the end of June. This is leading to rapid EPS growth, which should also support forecasts of dividend increases. The shares should reward investors with a 3.8 per cent yield next year. And it's not only the shares' yield that represents attractive value. Tristel's enterprise value is 12 times forecast operating profits, and 1.8 times this year's expected sales. Based on these valuation measures, Tristel is valued at a discount to the sector of a quarter and a third, respectively.

Part of the reason for this discount may be the company's reliance on one main scientific area, and the risk posed if a new disinfectant technology supersedes Tristel's brands. However, recurring revenues of 96 per cent should help to calm any nerves about the resilience of the business model, as should the fact that Tristel sells to more than 40 countries.

One potentially game-changing country Tristel does not sell to at the moment is the US, despite considerable interest in the company's products from clinicians across the pond. FDA approval of the company's products could come within two to three years, according to analysts at Equity Development, providing access to the largest healthcare market in the world along - with major potential for a re-rating of the shares. Management is understandably keen not to overplay the prospect of US expansion, although it remains a strategic priority, as does growth in Europe. In both cases, regulatory costs will eat into profits. But this is factored into the forecasts in our table and more than outweighed by the potential upside.