Why Is Intuitive Surgical Inventory Up 80%?

Intuitive Surgical (NASDAQ: ISRG) has seen stable positive aspects of over 80% from ranges of round $270 in early January 2021 to almost $500 now, vs. a rise of about 50% for the S&P 500 over this era. This may primarily be attributed to a 74% rise within the firm’s revenues to $7.6 billion now, versus $4.4 billion in 2020. Its P/S ratio has additionally improved marginally from 22x to 23x over this era. Intuitive Surgical has loved lofty valuation multiples, given its sturdy top-line and bottom-line progress.

Taking a look at inventory returns, ISRG was up 32% in 2021, it fell by 26% in 2022, and rose 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.
In reality, constantly beating the S&P 500 — in good instances and dangerous — has been troublesome over current years for particular person shares. The Trefis High Quality (HQ) Portfolio, with a set of 30 shares, has been in a position to buck this development and has outperformed the S&P 500 every year over the identical interval. Why is that? As a bunch, HQ Portfolio shares offered higher returns with much less danger versus the benchmark index; much less of a roller-coaster journey, as evident in HQ Portfolio performance metrics.

Given the present unsure macroeconomic setting with excessive oil costs and elevated rates of interest, might ISRG face the same scenario because it did in 2022 and underperform the S&P over the following 12 months — or will it see larger ranges? We predict ISRG inventory is pretty priced now. We estimate Intuitive Surgical’s Valuation to be $462 per share – beneath its present market worth of round $490. Our forecast relies on 20x revenues, aligning with the inventory’s common P/S ratio during the last 4 years.

Intuitive Surgical’s income rose 74% from $4.4 billion in 2020 to $7.6 billion within the final twelve months. Intuitive Surgical manufactures and sells robotic surgical programs. Its major machine is the da Vinci Surgical System, which helps surgeons carry out minimally invasive surgical procedures by means of instructions from a console. It delivers higher postoperative outcomes relative to conventional open surgical procedure. It additionally sells self-manufactured devices and equipment, a set of gadgets that improve the performance of da Vinci Surgical Methods. Moreover, it presents service contracts which embrace system service and buyer coaching.

Intuitive Surgical has seen its put in base rise 54% from 5,989 models in 2020 to 9,203 models now. This has bolstered the corporate’s top-line progress lately. Now, Intuitive Surgical stories its gross sales underneath three segments: da Vinci Surgical Methods, Devices & Equipment, and Companies. These segments accounted for twenty-four%, 60%, and 16% of the whole gross sales in 2023, respectively. Our dashboard on Intuitive Surgical Income: How Does PM Make Cash has extra particulars.

Devices & Equipment is the most important enterprise for the corporate with recurring revenues from procedures carried out. As such, the upper the put in base and variety of procedures carried out, it should bode effectively for the Devices & Equipment enterprise. The contribution of this section to the corporate’s complete gross sales has elevated from 56% in 2020 to 60% now, and we forecast it to rise to 63% within the subsequent three years.

Not solely has the corporate seen sturdy income progress lately its working revenue margin has additionally improved to 25.8% now versus 24.1% in 2020. Notably, Devices & Equipment is a high-margin enterprise for Intuitive Surgical, and with its contribution to general gross sales rising in coming years, the corporate will possible see a fair higher margin profile.

Total, Intuitive Surgical is on a path to ship sturdy gross sales progress within the coming years, pushed by a mixture of elevated put in base and better gross sales for its devices and equipment. The corporate’s newest da Vinci 5 platform was launched within the U.S. earlier this yr, and it’ll possible bolster the general gross sales progress. Nonetheless, most of those positives are possible priced in. We predict traders might be higher off ready for a dip to select ISRG inventory for strong positive aspects in the long term.

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