HSKA

I have been pondering to open a position on HSKA, a micro-cap, for a few days. Here's my reasons to buy:

• Strong top line growth (12% in the last few quarters)
• Significant improvement of gross and operating margins;
• Becoming profitable for the first half of 2006;
• Increased guidance for both Q3/06 and 2006;
• 2007 guidance is blowing me away, $0.1-0.2 per share;
• It is in a growing, yet defensive sector (IDXX, its main competitor, is also reporting very good results);
• Under-valued, it is traded at about 1X of its sales and about 11.7X of its 2007 EPS.

On the other hand, there's also a few concerns:

• It faces a dominating and fierce competitor, IDXX;
• Its balance sheet is a bit onerous;
• The stock is a bit over-bought;

I believe it could be at $1.8-$2.0 stock by the end of next year, a decent return. The bigger concern is the condition of the overall market. Is this the time to add more risks? (partially filled @1.35. Stop loss @1.25).