As technologies enable earlier diagnosis of cancer and other diseases, computer-aided detection systems (CADs), are critical to facilities such as women’s health-care centers that conduct mammograms to screen for breast cancer.

As one of the leaders in CAD technology used in the detection of breast cancer, Nashua, N.H.-based iCAD, Inc. (Nasdaq:ICAD) has enjoyed much investor interest in recent weeks, following news on April 4 that the U.S. Food and Drug Administration had approved a broader use of its technology. The clearance should put iCAD’s technology in thousands of additional mammogram machines by later this year.

ICAD stock, which started the year at $2.14 per share, closed at $3.60 on Friday, not far below its 52-week high of $4.24. Most analysts who follow the company see further room for growth as iCAD begins to recognize sales for its newly approved technologies for breast cancer detection, while working on ways to apply that same basic technology to the detection of other diseases such as colon cancer.

“They have a huge backlog of orders right now,” Jon Hickman, an analyst with MDB Capital Group, said in an interview with SmallCapInvestor.com. “They will keep making their existing products better and apply them to other cancers.”

The story of CADs in general (and iCAD in particular) is fairly complex, since these technologies do not work alone, but must be attached to a larger piece of equipment, such as a mammography machine.

The FDA, likewise, does not approve CAD technology in a vacuum. Rather, it reviews the safety and effectiveness of the technology when attached to a certain manufacturer’s equipment. ICAD’s big breakthrough last month was the approval of its SecondLook digital computer-aided detection system in FujiFilm Holdings Corp.’s digital mammography machines. The combination is aimed at screening for and diagnosing breast cancer earlier than the techniques now on the market.

Analyst Hickman projects sales from that iCAD/FujiFilm detection technology will reach $10 million to $11 million dollars within a year and a half. ICAD’s total revenues last year were $26.6 million, which offers some sense of the potential this latest FDA approval has to accelerate growth.

While iCAD’s technology already produced strong growth in the company’s 2007 revenues, which grew to $26.6 million in fiscal 2007 from $19.7 million the year before, as its net loss narrowed to $1.1 million from $6.4 million, most analysts agree that growth is likely to accelerate in the future.

Four analysts who track the company project revenues will rise to $35.5 million this year and reach $44.7 million in 2009. Their average forecast is for net income of $0.09 per share this year and $0.17 per share next year, versus a $0.04 per share loss in 2007.

While iCAD is not the sole maker of CAD technology, analysts stress that its limited focus offers it a competitive edge over rival companies such as Hologic Inc. (Nasdaq:HOLX), a maker of CAD imaging technology as well as the mammogram machines that the technology runs on. But iCAD may have the upper hand with the company: Hologic is less likely to sell its imaging technology to customers such as General Electric Co. (NYSE:GE) that compete with it in mammography machines.

Other factors that could be the source of even more growth in the future include iCAD’s ongoing research to apply its imaging technology to other diseases, including colon cancer, and its plans to grow through acquisitions. Last November, the company filed for a $75 million shelf registration, and Stephen Dunn, an analyst with Dawson James Securities, says iCAD has indicated it plans to use the money raised for a strategic acquisition in radiology. “We expect management will acquire a company with existing sales rather than a development-stage company,” Dunn wrote in a research report.

All these promising developments do not mean that an investment iCAD is without risks. Stocks of companies that make medical technologies and devices are inherently risky due to a brisk pace of innovation and the technology surrounding the detection of breast cancer is an area subject to intense research by many companies working on ways to detect it sooner, with fewer false positives. While iCAD currently offers one of the earliest detection systems available, a competitor could unveil an even superior product.

In addition, insurance reimbursement policies act as something of a wild card for companies such as iCAD, whose continued success depends on patients having affordable access to its services.

For those reasons, analyst Dunn has placed a “speculative buy” on iCAD. This is not a stock that investors should rush in to buying without an awareness of the risks involved. That said, all the signs on the near-term horizon point to continued strong growth for iCAD, which is likely to reward any investors who can handle the risk.