Why NuVasive, Inc. Shares Plunged

Why NuVasive, Inc. Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of NuVasive, Inc. sank 10% today after the medical device specialist posted a wider-than-expected Q2 loss and said that it received a subpoena from the U.S. Department of Health and Human Services related to a probe of false Medicare and Medicaid claims.

So what: The stock has soared in 2013 on a strong improvement in fundamentals, but today's second-quarter miss -- adjusted EPS of $0.22 versus the consensus of $0.24 -- coupled with the news of a subpoena is forcing Wall Street to bake in some uncertainty into the valuation. Of course, Piper Jaffray analyst Matt Miksic, using history as a guide, wrote in a note to investors that any settlement regarding false claims violations are likely to be manageable, suggesting that today's plunge might be a bit of an overreaction.

Now what: For the full year, management maintained its guidance of $1.00 in adjusted EPS and revenue of about $655 million.

"NuVasive is changing spine surgery with a proven, share taking strategy of Superior Outcomes, Absolute Responsiveness, and Speed of Innovation," said Chairman and CEO Alex Lukianov. "That mission will drive our evolution toward $1 billion in revenue with an improved profitability profile."

More important, with the stock now off 15% from its 52-week highs and trading at a reasonable forward P/E of 20, Mr. Market might finally be offering a window to buy into that bullishness.

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The article Why NuVasive, Inc. Shares Plunged originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

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