Medical device makers have been hard hit over the past month or so, with many well-known companies seeing their share prices fall significantly because of the ongoing COVID-19 pandemic. Otherwise healthy, well-established businesses are trading at steep discounts because of these recent declines.

As such, investors looking for good deals have plenty of options to choose from right now. NuVasive (NASDAQ:NUVA), a world leader in spinal surgery medical devices, has seen its share prices tumble by about 35% over the past month and a half. Does that make this stock a buy, or are there better companies out there to look for?

A doctor looking at an abstract hi-tech picture of a spine.

Image source: Getty Images.

Looking at the business

NuVasive's entire business specializes in providing minimally invasive spinal surgery technologies and devices, with its revenue split between spinal hardware sales and surgical support revenue.

The company's surgical platforms are its claim to fame; they integrate software detection and direct visualization to help surgeons avoid cutting a critical nerve during spinal surgery. NuVasive's primary platform, the X360, boasts a number of benefits over other spinal surgical systems. The company states that the X360 can shave up to an hour off total operating times while saving as much as $5,000 in hospital costs per patient. This means that patients spend less time under anesthesia, while a shorter operation time means there's less chance of a surgeon making an error or a mistake.

The company is also planning to launch its newest platform, Pulse, which it describes as a "single platform to include multiple technologies designed to help surgeons adopt more efficient, less disruptive surgical approaches in all spine procedures," sometime in 2021. While this is somewhat of a setback for the company, since Pulse's original commercial launch was planned for 2020, management stressed the importance of ironing out any developmental issues and focusing on making the platform as perfect as possible. It's better to delay a product launch than to rush out something unfinished and damage one's reputation. So in the long term, this move is probably best for NuVasive.

Understanding the spinal surgery market

The global spinal market as of 2018 was valued at about $11 billion. Of that amount, $8.5 billion involved open spinal surgeries, while the remaining $2.5 billion involved minimally invasive operations. NuVasive has succeeded in capturing a major share of this second submarket, with the company estimating that about 50% of all lateral spinal surgeries (which fall under the minimally invasive category) involve NuVasive products.

In terms of the much larger open spinal surgery market, NuVasive still has plenty of room to grow. When it comes to cervical, complex, and other open spinal surgeries, NuVasive's market share remains in the single digits. Only in a very specific type of spinal fusion surgery called anterior lumbar interbody fusion (ALIF) does NuVasive hold a 20% market share.

A doctor pointing towards a model of a spine.

Image source: Getty Images.

Looking at the financials

Over a 10-year period, the company's revenue growth has been consistent and impressive. Between 2009 and 2019, total sales grew from $370 million to $1.17 billion, approximately a 12.2% compounded annual growth rate (CAGR).

Looking just at NuVasive's fourth-quarter results, things look good. Q4 2019 revenue came in at $310.4 million, up 7.6% from last year. Most of this revenue is from product sales, such as its surgical platforms, which accounted for $279.2 million of all quarterly revenue. Only a small fraction of NuVasive's total income -- just $31.1 million in Q4 -- is from service revenue, which includes the clinical neuromonitoring services the company provides to healthcare facilities.

Name Market cap Quarterly revenue Quarterly revenue growth 10-year CAGR Gross margin Net income
NuVasive $2.6 billion $310.4 million 7.6% 12.2% 70.3% $29.9 million

Data source: Ycharts, NuVasive

Gross margins are improving as well, growing from 70.1% back in Q4 2018 to 73.2% in Q4 2019. Net income currently sites at $29.9 million for the fourth quarter, which is more than double the $12.2 million reported last year.

Should investors buy NuVasive right now?

NuVasive has been successful in siphoning off market share from its larger competitors, which include companies like Medtronic and Zimmer Biomet, an d that's pretty impressive given NuVasive's relatively small $2.6 billion market cap. That said, medical device makers were a frequent target of merger and acquisition activity throughout 2019. Medtronic bought out another company, Mazor Robotics, for about $1.7 billion back in 2018.

Given NuVasive's success, it wouldn't be surprising if the healthcare company ends up receiving potential buyout offers from larger rivals in the future. Investors who own shares of NuVasive at the time could enjoy significant gains in such a situation. However, it's uncertain whether large companies would be willing to make acquisitions during this time of market uncertainty due to the COVID-19 pandemic.

Over the long term, NuVasive seems like a good stock to own. While there are other healthcare-related stocks reporting much higher growth figures right now, that's shouldn't detract from NuVasive as a potential investment. Although it might not be in my list of top stocks to own right now, if you're looking to diversify your holdings or have room for a few more stocks in your portfolio, NuVasive is a good buy.