Saturday, May 26, 2018

K2M Disrupting The Market, Growing, And Still Undervalued

Innovation can still produce results even in a sluggish U.S. spine market, as seen with the ongoing growth at companies like K2M (KTWO) and Globus (GMED). In the case of K2M, the story is still about the company's disruptive product development in degenerative and complex spine, supported by a strong platform in 3D-printed implants. With that, the shares have done okay since my last update - rising close to 10%, which is not as good as Globus, but pretty good next to other med-techs in the spine space like Stryker (SYK) and NuVasive (NUVA).

I continue to believe that K2M shares are undervalued. The company's liquidity and cash flow situation is not ideal, but spending money on product development and competitive rep hires to support those product launches makes sense, and I believe the company will get to double-digit FCF margins within five years. With that, I'd consider buying into the mid-$20s.

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K2M Disrupting The Market, Growing, And Still Undervalued

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