Hospital acquired infections are a huge health care problem — and where there’s a huge problem, there are people trying to make money by solving it. That’s the beauty of the entrepreneurial spirit … and you’ve probably seen various teasers over the years about companies that are trying to “kill the superbugs” and help both to prevent hospital infections and to fight the resistant bacteria that have evolved to survive standard antibiotics.

Some of these picks have worked pretty well — the ones that promise cleaners that kill bugs dead-er haven’t impressed much, since bleach does a fine job on the most resistant bacteria and many of those were penny stock wipeouts, but the new super antibiotics have led to some profitable stocks in recent years, including Cubist (CBST) after it was teased by Mark Skousen back in 2010 on the strength of the Cubicin MRSA-fighting antibiotic (that one has almost doubled since November 2010).

I’ve actually been intrigued by a little company that’s not yet public, too, because it’s developed a UV bug-killer that’s fancy enough that hospitals are actually using it in their marketing — anything that can help a hospital differentiate itself from competitors on the germ-fighting front is a competitive advantage, so as you see hospital billboards advertising a particular product just picture Intuitive Surgical (ISRG), they turned the da Vinci surgical robot into a world-beating product by first developing a real medical case in one kind of surgery, then helping hospitals to market the heck out of it so every hospital felt the need to buy one to keep up with their neighbors and keep from losing surgeons and patients.

That little company also builds something they call a robot, though it’s a room-cleaning robot that uses UV light to sterilize hospital rooms — that product is from a company called Xenex, and they’re using at our local hospital. It has gotten some press attention, but the company is still very small and venture-backed so I can’t buy shares. Maybe it will come public at some point over the next few years, we’ll see.

But the reason for that startup is that the problem is real and large, and hospitals are very motivated to help solve it for both human and financial reasons (infections cost hospitals money, and government penalties and incentives are pushing hospitals to fight infection much more fiercely over the next few years).

So what is the stock that Hilary Kramer says is the owner of the patented “Superbug Firewall” that will profit from this battle to reduce hospital infections?

Here’s how she pitches it:

“With updated regulations from the U.S. Department of Health, hospitals and healthcare facilities are scrambling to improve their infection procedures.

“The Wall Street Journal reports that the government has set a goal of reducing hospital-acquired infections and other preventable problems by 40% this year from 2010 levels.

“This will lead to a ballooning $45 billion global infection prevention and control market.

“And one tiny U.S.-based healthcare company is at the forefront of this booming market…

“Game-Changing Stock #1:

“Life-saving ‘Superbug’ Firewall’ Technology Detected

“Only ONE tiny U.S.-based company has the exclusive patented rights to a host of groundbreaking infection control and prevention technologies… which I call the “superbug firewall”… that could reduce healthcare acquired infections by nearly 70%.

“Potentially preventing 1.4 million hospital acquired infections and saving up to 70,000 lives per year in the U.S. alone…

“This emerging medical devices company is a one-stop shop of infection control and prevention products ranging from water purification to filtration to healthcare disposables to sterilization to endoscopy to specialty packaging for infectious specimens….”

OK, any more clues about which specific company she’s teasing?

“This has sent this booming company’s net income up over 50% in its latest quarterly results versus the same period last year….

“I was excited to uncover this fast-growing medical device company that is creating breakthrough sterilization and sanitization technologies as well as other cutting-edge medical supplies for hospitals, dentists, and doctors.

“With its ‘superbug firewall’ technologies, this company maintains a leading share in every infection control and prevention niche… including endoscopy, water, dental disposables, and dialysis.”

And she breaks out some of their key products:

• “Endoscopy — Endoscopes are expensive items, and in the past have been cleaned manually, but the lack of uniformity in the process increases risk of infection.

  But this medical device company has drastically reduced the risk of infection by carefully preparing the endoscope the right way for its next use. This is known as reprocessing, and it includes manual cleaning, high level disinfection (HLD), and proper drying and storage.

• Water purification — This company’s groundbreaking water purification systems produce biologically pure water used in the healthcare, life sciences, food and beverage, and commercial industrial markets.
• Healthcare Disposables — The outbreak of the H1N1 flu in 2010 increased public awareness about controlling and preventing infectious diseases… And this company is a worldwide leader in innovative new face masks, sterilization products, towels and bibs that could drastically reduce infectious diseases.
• Dialysis — With only one-third of dialysis clinics in the U.S. reusing dialyzers, this company’s cutting-edge dialysis product allows for the reuse of dialyzers, which is huge cost savings for hospitals.”

So … who is it?

This one, sez the Mighty Mighty Thinkolator, is Cantel Medical (CMN)

Cantel is a good-sized small cap company, with a market cap of over $800 million, and they’ve been consistently profitable and very acquisitive over the years, snapping up little companies to provide them with new products and services in their infection fighting niche, and hopefully more future growth.

The stock is not cheap, at about 25X trailing earnings, and 20X forward estimated earnings (you can’t put much stake in the analyst estimate because it comes from just the single analyst who covers the stock), but they did boost earnings by more than 50% over the past year, their best growth since they came out of the financial crisis, and they’ve put most of their cash flow into acquisitions without taking on massive amounts of debt (they do carry some debt, but only about $80 million — easily manageable).

I haven’t looked at Cantel before today, but here’s what I like:

• They are in a sector that should see dramatic growth over the next five years, since their products and services are necessary and have high-impact results but are not, in most cases, prohibitively expensive capital investments for hospitals.
• They have solid market position in a few strong niches, like endoscope cleaning and dialysis sterilization, that should provide a solid baseline of revenue.
• Pays a small dividend that is almost immaterial right now (less than 0.5% yield) but has been pretty consistently growing in recent years — not financially important yet, but significant in signaling the company’s focus on rewarding shareholders.
• They’ve managed to generate revenue growth most years, partly through acquisitions, but have not dramatically diluted shareholders in the process — their growth seems largely to be something they can self-fund at this point.

I’m not rushing out to buy the shares, to be sure, but I like the niche and the company seems to be doing well — it’s near a 52-week high, and it’s arguably expensive at the moment, but the sector is poised for a good few years and the company is profitable and trades for only 2X trailing sales, so I would suspect that the major concern is likely to be competition. I don’t know anything about the competitors in this space, but I would assume that most of the massive hospital product providers like Becton Dickinson and Covidien are probably also active in selling infection-fighting products and services, so that competitive landscape is something I’d be trying to understand before buying stock in Cantel Medical.

And, of course, as with any other newsletter pundit Hilary Kramer’s stamp of approval on a “GameChanger” is no guarantee that this will be a winner — as we might remember more vividly if we look back on the last one of her medical device picks that we covered, the disappointing Zeltiq Aesthetics (ZLTQ) that collapsed just weeks after she teased it about a year ago and has drifted still further down in the months since. Of course, fighting MRSA and hospital infections is a much better sell than helping already skinny and healthy people to make their bodies look just a hair more perfect.

If you’d like to get a quick overview of what CMN does and how they’ve grown the business, they have a pretty good investor presentation up on their website here. Those of you who are interested enough in Cantel to go forth and researchify a little bit, give us a shout with a comment below and let us know if you see any red or green flags as you sniff around.