Readers of this space know that my investment bias is toward large-cap companies with demonstrated business models that also have a competitive advantage in established markets, preferably with a favorable global trend as a support. But every once in while an exception is made for a smaller, innovative company, and with aforementioned in mind, Masimo is worth a review.

Masimo (NASDAQ: MASI)'s Signal Extraction Technology non-invasively monitors patients' arterial blood-oxygen saturation levels and pulse rates.

Analysts like MASI's product variation, featuring both pulse oximeters in both hand-held and stand-alone and the company's client diversity. MASI has sold products to more than 50 medical equipment companies. The Reuters F2008/F2009 EPS consensus estimates for MASI are $0.57/$0.72.

The risks? Analysts are keeping an eye on the development of potential alternate technologies to pulse oximetry monitoring, as well as MASI's core component costs. Further, despite MASI's innovative technology and bright prospects, the company's short public history places it in the high-risk category.

The First Call mean rating for MASI is: Buy [5 firms]. Mean 2008 target: $41.00 [high: $47, low: $34].

Stock Analysis: Masimo is a high-risk stock not suitable for moderate-risk or low-risk investors. Investors with an investment horizon longer than two years should be rewarded from MASI's shares. Sell / Stop Loss if you were to purchase shares in this company: $18.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.