Shockwave Medical (SWAV) posted substantial increases in revenue in the fourth quarter. But it's still far from reaching its $6 billion annual addressable market. In this video from Motley Fool Live, recorded on Feb. 22, Contributors Brian Orelli and Keith Speights discuss Shockwave's most recent quarter and the opportunities ahead for the medical-device maker.

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Brian Orelli: Then moving on to Shockwave Medical, which develops treatments to break down calcium deposits in arteries. They reported fourth-quarter earnings last week. Revenue was up 59% to $22.7 million, gross margins increased to 72% from 61% in the year-ago quarter. Gross margins aren't something I really think about a lot on the drug side, but it's a big factor for devices, and that big jump from 61% to 72% is definitely going to help them as they move toward profitability. Received FDA [Food and Drug Administration] approval for severely calcified coronary artery disease during the quarter and are not issuing guidance, which seems reasonable given the unknown issues with the pandemic, and their main customers are going to be hospitals. And they may not have a firm grip on their capital outlays for the year. Shares dropped on Thursday after the quarter, but bounced back on Friday. It seems like the opportunity in severely calcified artery disease is a big opportunity but a bit of unknown. Thoughts on Shockwave Medical?

Keith Speights: Yeah, for our viewers who aren't very familiar with Shockwave, what they've done is they use intravascular lithotripsy, or IVL, to crack calcium that's blocking arteries. Anyone who has had a kidney stone, as I have, knows what lithotripsy is. It uses sound wave to break up these calcium deposits. It has been used for decades to help break up larger kidney stones, and it's a very safe process.

What Shockwave has done is they've taken this technology that's been around for a long time and they've applied it to use within arteries to break up those calcium deposits. They estimate that their addressable market is at least $6 billion annually. And this approach is, I think, significantly less risky than the current standards of care for unblocking arteries, so there are lots of safety advantages to it. It's also less expensive, which is good.

I think Shockwave's keys [to] success going forward, though is, they need to continue establishing the clinical proof of the advantages for IVL. That's important. They need to continue winning regulatory approvals for additional indications to be able to go after that full $6 billion-plus addressable market, and then securing reimbursements with payers, which they've done a good job so far, but they will need to continue to do that. Their market cap is around $4.5 billion. I think the stock has plenty of room to run as they capture more of that market.

Orelli: Great. It seems like it's just a fairly small company. I think that's the key to investing in it right now as we're looking for substantial growth of the small market cap, which should help investors in the long run.