Nuva Spine
Image source: NuVasive.

The medical device field is a tough one, with companies of all sizes competing in a cutthroat market. NuVasive (NASDAQ:NUVA) has chosen to focus on a particularly narrow area, specializing on minimally invasive spinal surgical procedures, and by doing so, it has been able to stand up against larger companies like Stryker (NYSE:SYK) with broader product lines. Coming into its fourth-quarter financial report on Thursday, NuVasive shareholders expected that the company would be able to sustain fairly h healthy growth. NuVasive's actual performance was even stronger, and the medical device maker sees some promising growth ahead for 2016. Let's look more closely at NuVasive's latest report to discover how it did and what's ahead for the company.

NuVasive finishes 2015 healthy
NuVasive's fourth-quarter results gave investors everything they wanted to see. Revenue rose 5.4% to $204.3 million, which was almost exactly what those following the stock had expected from the company. Adjusted net income jumped 38% to $18 million, and that resulted in adjusted earnings of $0.35 per share, topping the consensus forecast by $0.04.

A closer look at NuVasive's numbers shows some good points and bad points in the company's performance. The strong dollar weighed on NuVasive's performance to a limited extent, costing it almost 1.5 percentage points of revenue growth. Gross margins fell by a percentage point from the year-ago quarter, but NuVasive managed to hold growth in its total operating expenses to less than 1%, boosting its adjusted operating margins by 2.4 percentage points.

CEO Greg Lucier was happy about how NuVasive finished the year. "NuVasive continues to gain market share globally," Lucier said, "as well as record operating profit margin expansion for the year." The CEO expects that NuVasive should be able to find multiple avenues toward growth in 2016.

Big news for NuVasive
One growth catalyst came from an announcement today that NuVasive had completed its acquisition of Ellipse Technologies. In exchange for an upfront $380 million cash payment and potential milestone payments of $30 million next year, NuVasive will get the benefit of Ellipse's magnetic growing rod technology, which has seen favorable adoption rates in the orthopedic and pediatric deformity arenas. The move therefore diversifies NuVasive's business beyond its previous concentration on adult spinal conditions, and the company expects the deal to be accretive to earnings in 2016.

Yet NuVasive might not be done with acquisitions despite the big payout it just made. As Lucier said, "Very selectively, we also intend to explore compelling inorganic opportunities that add value," giving Ellipse as just an example of what NuVasive might look for in 2016.

NuVasive's guidance for 2016 was favorable. On the revenue front, NuVasive now expects sales of about $923 million. That's quite a bit higher than the $881 million that most investors were expecting, but the higher number includes $53 million in expected sales from Ellipse, so the question is whether investors had already built the previously announced acquisition into their models. Guidance for adjusted earnings of $1.48 per share is a penny below the consensus forecast among investors but still represents growth of about 13%.

NuVasive's acquisition strategy is consistent with what others in the field are doing. Earlier in the week, Stryker said that it would purchase assets from Synergetics USA related to its neuro product portfolio. A Stryker executive said that the move is "highly complementary to Stryker Instruments' Neuro Spine & ENT business and is aligned with [its] strategy of expanding its neurosurgical product offering." As consolidation hits the industry further, NuVasive should work to keep up its strength in its specialty while also looking to broaden its scope.

NuVasive shares didn't move in after-hours trading following the announcement, but in general, the company appears to be following a sound strategy toward growth in 2016. Even with big rivals like Stryker to go up against, NuVasive has done a good job thus far of building itself up and has opportunities to continue to do so this year and beyond.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends NuVasive. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.