Owning small-cap companies can be a little nerve-racking, especially if it's a medical device company that's waiting on FDA approval. For Shockwave Medical (NASDAQ:SWAV) investors, the wait is over. It received the go-ahead from the FDA for its coronary artery disease device this past month. On a Fool Live episode recorded on Feb. 18, Fool contributor Brian Feroldi discusses the impact this approval could have going forward and dives into the company's most recent financial results.

Brian Feroldi: I'm going to talk about Shockwave Medical. This is ticker symbol, S-W-A-V. Shockwave reported yesterday. A quick reminder about what they do. Shockwave is focused on calcium deposits that are in arteries and veins. Over time, your arteries and veins can become clogged due to progressive buildup of fat. Over time they can become calcified, so they could become rock hard. That is a real big problem because normal stents that are the gold standard treatment for artherosclerosis doesn't really work.

What Shockwave has done is they've used a technology called lithotripsy, which has been used to eliminate kidney stones, which are just calcium deposits in your kidney. They miniaturize that, they put it into a stent that goes into your veins, and they use these shockwaves to blast apart the calcium and then they can go in there and put a stent in. That is the technology and that is the company. They are the only ones doing this. They launched about three years ago, roughly FDA approval, three years ago, and they've been growing very quickly.

What do we see in Q4? Revenue grew 59 percent to $23 million. Wall Street was expecting about 20 million. It was an upside surprise. Gross margin expanded to 72 percent from 61 percent, 1,100 points of gain there, I love to see that. Operating expenses grew 33 percent to 32 million. They are building out their sales-force. Their expense growth was slower than the revenue growth. That was good to see. Net income was negative $16 million. Their net loss was larger than it was the year-over-year period, but is only 16 million in a quarter, that was 46 cents per share. Wall Street was expecting 42. It was a little bit worse of a net loss than they were expecting, but the company has over $200 million in cash, so that net loss is easily fundable.

Here are the full-year numbers. Fifty-eight percent revenue growth to about $68 million. Gross margin up, operating expenses were up, and their net loss was about $66 million. They continue to plow all capital into growth, growth, growth. Fifty-eight percent revenue growth is pretty damn impressive given that they are in the middle of a pandemic. This is a surgical device. It's used in the hospitals and a whole bunch of hospitals that were on shutdown for many, many months. I am really impressed with this number, period, let alone being able to grow that fast in a pandemic year. Really exciting there.

Here's to look at it graphically. Again, they launched in 2017 and they've gone from 1.7 million to 67 million. Their growth has been really good. Their gross margin is growing all along the way and a good chunk of their revenue actually comes from international markets. This device is in use both in the US and international markets.

The big news from the quarter or actually from just one day ago, was this. They've received FDA approval for their intravascular lithotripsy device for severely calcified coronary artery disease. This is something that investors have been looking forward to for the last year or so. They have European approval for this very indication, but they've been waiting to get it in the US. That was the big news that came out, I think two days ago. It was the day before earnings, they announced this.

In other news, they got some new CMS codes to establish different payment for their technology. That's really good news and they've got eight new codes for use in the ambulatory surgical centers. That's good news on the payment side. Their sales force was just about doubled to about 125.

These are all the countries that they are currently available for sale in. It's about 55 countries around the world is where they are currently available for sale.

Let's talk about their opportunities. They are currently using three different spots. Peripheral artery disease, the leg or the arms. Coronary, this is the one that they just got FDA approval for, which is the heart. It's been available for sale in Europe since 2018. They just got FDA approval in the US two days ago and they are currently still doing ongoing studies in Japan to get approval for this, and they also have approval for the valve.

This sums up the opportunity for them. It has the number of patients that undergo procedures for all the different opportunities. This is in their core markets that they are available to the US, Europe, and Asia. Previously, they had several of these locked down, but the coronary one is the one they just got FDA approval for. You can see that there's 3.5 million procedures for coronary artery disease, and about 30 percent of cases are calcified. That's when it would be useful to use Shockwave's device. That's about 1.2 million procedures that they are now accessible for. It's less than that because it's just approval in the US, but it still just shows the size difference between the coronary opportunity and all the other ones combined. That FDA approval is a big deal that opens up a big market opportunity.

Brian Withers: Those are annual rates, right?

Brian Feroldi: Yes. Correct. Annual. This company did not give guidance at all. They said we don't know what's going to happen in 2021. They said things are slowed down in the end of the fourth quarter and then they've since started to ramp up. That's the thing we've heard over and over again.

This is what Wall Street thinks, take it for what it's worth. Wall Street thinks that revenue is going to grow 86 percent this year to about 130 million and then another 50 percent-plus next year to about 190 million. Those are the current expectations.

The stock today is trading at about 130, which is a $4.4 billion valuation on a trailing sales basis, it's about 72 times. On a forward basis, it's about 45 times. It's less than that. It's like 40-ish time sales. Pricing in a huge amount of growth. The company has lived up to and exceeded expectations so far. It's got a good gross margin and we should see operating leverage start to kick in since they made some of the investments in 2020.

But my big takeaway is [the] thesis [is] on track. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.