One innovative microcap company is making a fortune by using cellphones and data stored in the cloud to save patients a trip to the doctor’s office.

We like Bio Telemetry because it’s disrupting the patient-must-visit-doctor model of healthcare, but this stock also resonates with us because the technology has other applications and it’s a small company that can grow exponentially.

In my early years as a physician, patients with chronic conditions had to drive to the doctor’s office for follow-up testing. That’s often tough to arrange given that most of us have families and jobs. But through the clever use of cellphone technology, easy-to-use interactive apps and the cloud, this tiny Pennsylvania-based company is making life more manageable for patients and doctors.

Bio Telemetry (NSDQ: BEAT)—a $600 million healthcare information company with a rapidly growing market share in mobile cardiac monitoring—has the technology to bridge the gap between modern life and people with heart disease.

BEAT has multiple devices that continuously monitor, record, report and communicate between patients and doctors. All those devices, though, have one thing in common: They’re easy to use.

For example, let’s say that Mr. Smith has occasional irregular heartbeats and chest pain, but his cardiologist hasn’t been able to confirm the symptoms by exam or testing. So he prescribes Mr. Smith a BEAT MCOS (monitoring continuous outpatient service) device. Mr. Smith receives a cellphone-based and easy-to-operate MCOS monitor, and a communication system complete with heart-monitoring leads, wires and an instruction booklet. When the monitor is properly set up and turned on, it begins to record and broadcast information within 15 minutes. If the patient has a symptom, such as chest pain, the “symptom mode” offers push-button choices to match the symptom and relays the information to the doctor wirelessly. Each time the patient pushes a button the symptom is recorded and relayed to Cardionet, BEAT’s wholly owned data monitoring and processing subsidiary. Cardionet records, stores and processes the data via its cloud platform. The device provides the information to the cardiologist, who can contact the patient through the monitor’s communication mode during an event or for routine issues that develop.

Beating the Path to Growth

Biotelemetry is an expanding market that can go well beyond its 550,000 existing users. Heart disease remains the leading killer in the U.S. with as much as 5% of the U.S. population suffering from irregular heartbeats, either as an independent condition or in relation to other types of heart disease. This is likely to increase with an aging population, stressful lifestyles, tobacco and vaping, lack of exercise, obesity and current immigration trends from countries with less advanced healthcare.

As a result of these health trends, BEAT has increased sales for four consecutive years while turning profitable in 2015 and delivering five sequential quarters of rising revenue and four of five quarters of rising net income. The company is expected to report its earnings Feb. 15, with average analyst estimates of 18 cents per share versus 15 cents a year earlier.

A Winning Strategy

The downside, if there is one, is the general uncertainty of the healthcare system, with heart disease a target for Medicare cost cuts. The upside for BEAT is that while medical care for heart attacks qualify for only bundled Medicare payments—a detriment to revenue for pharmaceutical and specific medical equipment companies—continuous monitoring of chronic conditions is a potential growth area. Medicare’s tilt toward preventive care favors the use of continuous monitoring devices. As a result BEAT is expanding its platform to include monitoring blood sugar for diabetics and blood clotting for patients on blood thinner therapy.

BEAT’s December 2016 acquisition of Telcare will add to its cellphone-based monitoring offerings and expand its market into blood sugar monitoring, an area that over time should deliver steady revenue. BEAT is also increasing revenue through the licensing of its technology. The company recently licensed its technology to Bloom Technologies for use in pre-natal monitoring. BEAT also offers a cloud-based app for patients on blood thinners to report their self-obtained, blood clotting results to physicians directly.

Short-Term Caution

I like the stock over the next six to 12 months, but the next few days to weeks may be difficult for the healthcare sector and rapid growth stocks such as BEAT, which sports a 41 price-to-earnings ratio. So it’s worth owning a protective put with an intermediate time frame attached to it as part of the package for now.

Buy Biotelemetry Inc. (NSDQ: BEAT) up to $25.  Risk-averse investors may consider a protective put option in the current market. As an extra precaution, consider the May 19, 2017, 21 Put (BEAT170519P00021000) with its intermediate time frame.