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Up 110% over 5 years and down 10% today — is this a growth-stock buying opportunity?

We have an opportunity today to run a slide rule over a growing company in the defensive medical products sector, which I see as attractive. Indeed, most firms involved in the wider pharmaceutical and medical treatments sector have the opportunity to tap into a stream of consistent cash inflow derived from constant demand from customers.

But Advanced Medical Solutions (LSE: AMS) is down by 10% today as I write on the release of its half-year report. And that follows at least five years of rising revenue, earnings and shareholder dividends that powered a 110% increase in the share price over the period, even after deducting today’s fall.

A strong trading niche

The company describes itself as “world-leading” developer and manufacturer of “innovative and technologically advanced” products for the global advanced wound care, surgical and wound closure markets. In today’s world, that sounds to me like a great business to be in, but today’s report reveals to us something of a stall in the growth figures, although the directors believe the situation is temporary.

While constant currency revenue in the first six months of the year rose 1% compared to the equivalent period last year, adjusted diluted earnings per share slipped back by 3% and adjusted net cash from operations fell by 12%. Yet undeterred, the directors pushed up the interim dividend by 19%, suggesting their optimism about the immediate outlook for trading.

The hiatus in overall profit growth seems to have been caused by the company’s planned investment in research & development (R&D) and a previously flagged slowdown in US sales of the wound adhesive product Liquibrand, which fell by 27%. But chief executive Chris Meredith said in the report the firm expects US sales to recover next year. Meanwhile, sales of other products in the US and other geographies actually grew by 10% overall, suggesting that the firm’s general growth trajectory remains intact.

Temporary challenges

The company puts down its problems in the US to customer de-stocking, competitor activity and “delayed” product launches. I’m optimistic that these challenges will indeed prove to be temporary and today’s plunge in the share price will turn out to be a decent opportunity to buy some of the company’s shares at a discount.

But we need a discount if we can get it because the growth story here has not gone unnoticed by the investing community. Even at today’s share price close to 251p after the fall-back, the forward-looking earnings multiple for 2020 sits just above 22. That compares to City analysts’ expectations of an advance in earnings that year between 7% and 8%. Indeed, the valuation seems quite rich, but I see that as a mark of quality in this case.

Nonetheless, when valuations are high, we often see corrections in share prices like this on any slightly less-than-positive news, as today with AMS. Yet, in this case, the directors expressed their optimism about the firm’s medium- and long-term prospects, so I see the shares as attractive and would be tempted to buy a few on dips and down-days.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended Advanced Medical Solutions. 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.