Vitamin D is not only good for the human body, it is proving very valuable to Immunodiagnostic Systems too. This group provides a range of laboratory tests for vitamin D as well as other compounds, and such has been the demand for the products, the company has been able to post annual double-digit sales growth over the decade since it was the subject of a management buyout in 1996.

The group’s principal products detect levels of vitamin D in human serum. This may not seem the most lucrative area of the healthcare market until you discover that the medical community is only now realising the vital importance of monitoring the amount of vitamin D in the body. Abnormally low levels can indicate susceptibility to such bone-related diseases as osteoporosis. With an ageing population it has become increasingly pertinent to measure these levels so that an early diagnosis can be made and effective therapies put in place.

In addition to this specific problem there is a wider issue, namely that natural levels of vitamin D are falling across populations in the developed world. This may be because vitamin D is generated by exposure to sunlight. The majority of the population now spend their waking hours inside, either at school or at work, with very few working outside in the sunlight. Links are also being made between lack of vitamin D and common cancers, such as those of the colon, prostate and breast.

Trade has been so buoyant that it has replaced its principal competitor in Japan as the leading provider of vitamin D tests. Progress has continued since the company floated on AIM last December at just 50p, raising a net £1.1 million. Recent interim figures for the six months to September saw sales rise 49 per cent to £3.72 million, allowing pre-tax profits to jump nearly sevenfold from £57,000 to £387,000.

This significant improvement has happened as the group set up direct distribution networks in Germany and the US. Previously a third party had the licence for German sales. And US sales have just started because US regulator, the FDA, only approved the vitamin D product towards the period end in August. A French distribution arm was established in October.

This suggests the second half could be even better, when the group will additionally benefit from the inclusion of sales from the recent £1.5 million acquisition of Finnish concern SBA Sciences, another developer of bone disease tests.

House broker Teather & Greenwood certainly believes so, predicting that pre-tax profits for the full year will treble to £1.21 million as sales surge 39 per cent to £7.56 million. That equates to earnings of 7.6p a share, giving a p/e of 13.2, even after the shares have doubled from their float price to 100p.

The broker expects further margin improvement to boost the bottom line in the following year to £1.91 million. That would give earnings of 11.4p a share and a modest p/e of 8.8.

By then, Immunodiagnostic could be benefiting from more innovative tests currently being developed under the auspices of freshly appointed chief scientific officer Dr Phil Lee, who hopes to produce four new products each year. One will be for MRSA and others will be in the area of protein research, where much innovative diagnostic work is currently focused.

These developments, combined with continued strong growth of the existing vitamin D products in new territories such as the US, should ensure that sales and profits continue to rise, thus lifting the share price from current levels. Buy.