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.

MOST NOTEWORTHY: Credit Suisse, Masimo and Marvell Tech were today's noteworthy upgrades:

• Bear upgraded Credit Suisse Group (NYSE: CS) to Peer Perform from Underperform as they believe the company's balance sheet will stabilize and the company's Private Banking business is holding up well in difficult conditions. Goldman, which raised shares to Neutral from Sell, believes the worst is over regarding the market downturn.
• Citigroup upgraded Masimo Corporation (NASDAQ: MASI) to Buy from Hold citing expectations of a strong Q1 report, expected FDA approval for hemoglobin monitoring in 2H08, and valuation.
• Marvell Technology Group Ltd (NASDAQ: MRVL) was raised at Friedman Billings to Outperform from Market Perform based on valuation and improved business conditions.

OTHER UPGRADES:

• Goldman raised LM Ericsson Telephone Company (NASDAQ: ERIC) to Neutral from Sell.
• JP Morgan upgraded Big Lots Inc (NYSE: BIG) to Overweight from Neutral.
• Petro-Canada (NYSE: PCZ) was upgraded at CIBC to Sector Outperformer from Sector Performer.

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who 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 along this line Masimo looks attractive.

Masimo Corporation (Nasdaq: MASI)'s signal extraction technology non-invasively monitors patients' arterial blood-oxygen saturation levels and pulse rates.

Analysts like MASI's product variation, which features pulse oximeters in both hand-held and stand-alone versions, and the company's client diversity: MASI has sold products to more than 35 medical equipment companies. The Reuters FY 2007/FY 2008 EPS consensus estimates for MASI are $0.66 to $0.50.

It's been tough for healthcare IPOs. But in the case of the debut of Masimo (NASDAQ: MASI) (ticker info unavailable at posting), things are certainly more upbeat. The stock is up about 19% in today's heavy trading.

Masimo develops non-invasive patient monitoring products to improve patient care. The systems involve circuit boards and reusable sensors as well as sophisticated software.

Because of the effectiveness of the technology, Masimo has had lots of traction with customers. For example, the company's worldwide installed base is about 399,000 units. Masimo also has major OEM agreements with companies like GE Medical Systems, a division of General Electric Company (NYSE: GE), Philips Medical Systems and Mindray Medical International (NYSE: MR).

Last year, Masimo posted revenues of $155.1 million. In fact, the compound annual growth rate (CAGR) has been 41.6% over the past four years. The company is also profitable

Lead underwriters of the deal included Piper Jaffray, Deutsche Bank Securities, and Citi.

The prospectus is located at the SEC website. Also, if you want to see more recent IPO pricings, click here.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.