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If you like AstraZeneca, you could love this health-focused small-cap

Pharmaceutical giant AstraZeneca is forecast to post some impressive advances in earnings. But I think there’s also great potential for investors in healthcare-focused advisory company Cello Health (LSE: CLL).

The firm describes itself as a global healthcare-focused advisory group comprised of a set of leading clinical, commercial advisory and digital delivery capabilities.” There’s an office network in the UK, USA, and Asia and the company reckons it deals with 24 of the top 25 pharmaceutical clients globally” along with biotech, diagnostics, devices and other key non-healthcare clients.

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Steady progress internationally

The company delivers its service via almost 1,000 “highly skilled professionals” using thinking, technology and digital solutions. And the aim is to help clients achieve brand success in today’s complex global markets.

There’s good money in it, and today’s full-year results reveal that revenue rose 2.3% compared to the year before and adjusted earnings per share moved almost 14% higher. The directors expressed their satisfaction and optimism by pushing up the total dividend for the year by 10%, which means the firm has increased its dividend for an impressive 13 years in a row.

The company recently opened new offices in Philadelphia and Berlin, and the directors said in the report the business is “well positioned” for further international expansion in the healthcare sector. Non-executive chairman Chris Jones explained the firm sees the pharmaceutical and biotechnology sector as a “stable and attractive” market for the long term. He said that scientific advances, strong R&D pipelines and the need to commercialise products all look set to keep demand high for Cello’s scientific commercial services.

A big opportunity in the US

In 2018, around 50% of revenue derived from the UK but the firm has a big and growing US business too, which delivered 29% of the total. Some 12% came from the rest of Europe and 9% from other countries around the world. Looking forward, the directors are confident of a strong performance in 2019 and to growing the firm’s presence in the US.

City analysts following the company expect modest single-digit advances in earnings over the next couple of years, which is unspectacular but could be one reason for the neutral-looking valuation. Today’s share price near 122p throws up a forward-looking price-to-earnings ratio of almost 14 for 2019 and the predicted dividend yield is just over 3%.

I’ve been keen on the healthcare sector for some time because of its defensive characteristics, and Cello has nailed its colours firmly to the one mast, even changing its name recently from Cello Group to Cello Health. I like the firm’s record of generally rising revenue and normalised earnings backed by strong incoming cash flow and the way the directors have channelled the firm’s progress into the dividend.

If operations gain traction in the US, we could see the potential for accelerating growth down the line. I see the stock as attractive.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.