A Diamond in the Rough

I wrote recently that if you find a stock that’s hitting new record highs in this market, it really is worth looking into if you are the trader type. If broader stock market action is bad, but you’ve got a stock experiencing strong upward momentum, the probability that it will keep going up increases significantly. This is especially the case if stock market action turns positive.

I’m not saying this with any scientific evidence; rather, this is the experience I’ve gone through time and time again.

Once such company that’s really bucking the trend in this market is NuVasive, Inc. (NASDAQ/NUVA). I wrote about this company in this column back in the middle of April.

NuVasive is a medical device company that designs and sells products for the surgical treatment of spine disorders. The company’s main product offering includes a minimally disruptive surgical platform called “Maximum Access Surgery” that offers proprietary software to help avoid nerve damage, a split-blade design retraction system, and specialized implants. The company, founded in 1995, is based in San Diego.

Business must be good for NuVasive, because the company just reported excellent financial growth in its second quarter.

According to the company, its revenues in the quarter grew to more than fifty-seven million dollars, representing a 61% increase over revenues of over thirty-five and a half million dollars generated in the second quarter of 2007, and a 12% increase over revenues of just over fifty-one million dollars generated in the first quarter of 2008.

Gross profit for the second quarter of 2008 was almost forty-eight million dollars, yielding a gross margin of 83.3%. This compares to gross profit of close to twenty-nine million dollars and a gross margin of 81.2% in the second quarter of 2007.

On a GAAP basis, NuVasive reported a net loss of $0.5 million, or ($0.01) per share, in the second quarter of 2008, as compared to a net loss of $3.4 million, or ($10.00) per share, in the comparable quarter last year.

In a lackluster market environment, it’s great to find a company selling excellent products that are in high demand. This is why the stock is bucking the market’s trend.