Monday, October 10, 2016

NuVasive Has Restored Its Growth Cred And Has Been Well-Rewarded

While I did say that I thought NuVasive (NASDAQ:NUVA) was undervalued when I last wrote about this growing spinal care specialist, I didn't think a 40%-plus run in six months was on its way. But with ongoing share growth, margin improvements, incremental M&A, and clear signs that the company's comprehensive strategy is working in the market, investors have gotten back on board in a big way.

I don't want to be a wet blanket, but I do wonder if the excitement has gotten a little overheated. My expectations for 2020 have gone up close to 10% (and are still below management's targets) and the company could be set up to gain even more share in the deformity market and in the degenerative market with a move toward bundled payments. Still, I'm hesitant to stretch my valuation assumptions beyond what has historically worked for growth med-tech.

There's a pretty clear pattern with this stock - investors get excited, there's a notable pullback, a flattish period, another run, and then another pullback. The shares are still up almost 300% over the last five years, though, so that's volatility that I think many investors can learn to live with. I want a better risk/reward trade-off before I put my own money here, but NuVasive is definitely making hay today by exploiting a lack of innovation at entrenched rivals like Johnson & Johnson (NYSE:JNJ) and Medtronic (NYSE:MDT).

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NuVasive Has Restored Its Growth Cred And Has Been Well-Rewarded

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