Ought to You Decide Intuitive Surgical Inventory At $370?

Intuitive Surgical (NASDAQ: ISRG) lately reported its Q1 outcomes, with revenues and earnings beating the road estimates. The corporate reported income of $1.89 billion and adjusted earnings of $1.50 per share, in comparison with the consensus estimates of $1.87 billion and $1.41, respectively. The corporate’s upbeat efficiency was pushed by sturdy international da Vinci process quantity, which was up within the mid-teens.  On this be aware, we focus on Intuitive Surgical’s inventory efficiency, key takeaways from its latest outcomes, and valuation.

Firstly, its inventory efficiency, ISRG inventory has proven sturdy positive aspects of 35% from ranges of $275 in early January 2021 to round $370 now, vs. a rise of about 30% for the S&P 500 over this roughly three-year interval. Nevertheless, the rise in ISRG inventory has been removed from constant. Returns for the inventory had been 32% in 2021, -26% in 2022, and 27% in 2023. Compared, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that ISRG underperformed the S&P in 2022.

Actually, constantly beating the S&P 500 — in good instances and unhealthy — has been troublesome over latest years for particular person shares; for heavyweights within the Well being Care sector together with LLY, UNH, and JNJ, and even for the megacap stars GOOG, TSLA, and MSFT. In distinction, the Trefis High Quality (HQ) Portfolio, with a set of 30 shares, has outperformed the S&P 500 annually over the identical interval. Why is that? As a bunch, HQ Portfolio shares offered higher returns with much less threat versus the benchmark index; much less of a roller-coaster experience, as evident in HQ Portfolio performance metrics.

Given the present unsure macroeconomic atmosphere with excessive oil costs and elevated rates of interest, might ISRG face an analogous scenario because it did in 2022 and underperform the S&P over the following 12 months — or will it see a powerful leap? From a valuation perspective, ISRG inventory seems to be like it’s appropriately priced. We estimate Intuitive Surgical’s Valuation to be $394 per share, not removed from its present ranges of $370. At its present ranges, ISRG inventory is buying and selling at 18x revenues, aligning with the inventory’s common P/S a number of during the last 5 years.

Coming to the newest quarter, Intuitive Surgical’s income of $1.89 billion displays an 11% y-o-y development pushed by a 16% rise in worldwide da Vinci process quantity. The corporate positioned 313 da Vinci methods in the course of the quarter, much like what it positioned within the prior-year quarter. Nevertheless, its whole put in base elevated 14% since March 2023. Intuitive Surgical secured the U.S. FDA approval of its next-generation platform — da Vinci 5 – in March 2024. It positioned eight of its new methods in the course of the quarter. The brand new platform will doubtless bolster gross sales development within the coming years. The corporate’s working margin expanded round 200 bps to 24.8% in Q1. The corporate’s backside line stood at $1.50 on an adjusted foundation, reflecting a 22% enhance over the prior-year quarter.

Wanting ahead, Intuitive Surgical raised its projected international da Vinci process quantity development to 14%-17% in 2024, versus its prior 0utlook of 13%-16%. Total, Intuitive Surgical navigated nicely in Q1, with upbeat outcomes and strong steerage. Nevertheless, its inventory has already risen 10% this 12 months, and we expect buyers prepared to enter will doubtless be higher off ready for a dip.

Whereas ISRG inventory seems appropriately priced, it’s useful to see how Intuitive Surgical’s Friends fare on metrics that matter. You’ll discover different beneficial comparisons for corporations throughout industries at Peer Comparisons.