K2M Gets A Boost From A Stronger Spine Market

Investors have been doing some bargain-shopping lately in the spinal care space, as these stocks have largely lagged a strong med-tech market due to ongoing concerns about weak U.S. volume growth and persistent price pressure. That bargain-shopping got a nice boost with second quarter earnings, as all but one of the four major independents (K2M (KTWO), NuVasive (NUVA), Globus (GMED), and SeaSpine (NASDAQ:SPNE)) saw a 10% or better pop on June quarter earnings (Globus being the exception, but that stock had been on a tear up into June).

I’m still a little concerned about the overall level of valuation in the med-tech space and the risk that spine procedure volume growth could disappoint again, but I also still like K2M. Although the company’s focus on complex/deformity helps to shield it somewhat from volume and price pressures, I also like the company’s expanding sales force and product line-up, as well as the potential for margin leverage as it scales up its operations. Although the shares are no bargain by discounted cash flow, they do appear to be trading at a lower forward revenue multiple than the growth rate would otherwise suggest is fair.

Read more here:
K2M Gets A Boost From A Stronger Spine Market