What happened

Thanks to market-beating revenue growth and optimism surrounding its next-generation spine surgery platform, NuVasive (NASDAQ:NUVA) was a top-performing healthcare company last year, returning a market-leading 56.1% in 2019, according to S&P Global Market Intelligence.

So what

NuVasive's minimally invasive lateral surgical systems are a compelling alternative to traditional systems that access the spine through the back or front of the body. By allowing surgeons to access the spine through a patient's side, recovery times can be shorter and there are potentially fewer complications.

A man listens through a wall using a cup.

Image source: Getty Images.

These advantages have led to NuVasive chipping market share away from larger competitors, including Medtronic (NYSE:MDT), Johnson & Johnson's (NYSE:JNJ) DePuy Synthes, Stryker (NYSE:SYK), and Zimmer Biomet (NYSE:ZBH). Over the past five years, NuVasive's market share has increased to the low double digits, up from the mid to high single digits. As a result, annual sales now eclipse $1 billion.

In Q3 2019, revenue grew 7.2% year over year to $290.8 million. That handily beat industrywide growth of only about 2%. Importantly, NuVasive also made headway toward improving profitability last year. By streamlining manufacturing, for example, gross margin improved 70 basis points year over year to 73.5% in Q3. Although that improvement was somewhat offset by pricing pressure and research investments, operating margin still ticked up 10 basis points in the third quarter from the year prior, resulting in NuVasive's earnings per share increasing to $0.59 in Q3 2019 from $0.56 in Q3 2018.

Following the company's solid third-quarter performance, management boosted its full-year revenue outlook to approximately $1.16 billion, up from prior guidance between $1.14 billion and $1.16 billion. It also raised its outlook for operating margin growth by 20 basis points and the low end of its EPS outlook by $0.10 to $2.35.

Investors were obviously impressed by the improving outlook, but optimism was also fueled by NuVasive's plans to launch its newest system, Pulse, in 2020. It can work with other systems used in spine surgery to improve workflow through increased automation. The company focused on building buzz for the system in 2019, but it hopes to report the first revenue from Pulse sales this year.

Now what

There's been a lot of merger and acquisition activity in the spine surgery market over the past few years. For instance, Medtronic bought Mazor Robotics for $1.7 billion (to push into robotic spine surgery) and Stryker spent $1.4 billion buying K2M (to bolster its minimally invasive lineup) in 2018. Industry consolidation suggests NuVasive could someday be a target of a larger, diversified medical device company, too.

The stock could be worth owning even if a suitor doesn't emerge, though. The industry is valued at about $10 billion annually, so NuVasive still has plenty of room to grow sales, especially internationally, where its market share is only about 4%.

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