Does Intuitive Surgical, Inc. Have Any More Room to Run?

If the past few quarters are any indication, that answer is very much ‘Yes’

ISRG - Does Intuitive Surgical, Inc. Have Any More Room to Run?

Source: Jon Fingas via Flickr (Modified)

Intuitive Surgical, Inc. (NASDAQ:ISRG) sports a market cap of $53 billion and it is up nearly 65% in the past year.

Given that most healthcare stocks haven’t seen that kind of upside, there’s something special going on with ISRG stock.

There are few things that have kept Intuitive Surgical stock rolling quarter after quarter for some time now. If you simply look back at analysts’ expectations, they have raised their price targets regularly for a while now.

But first, let me discuss what the company does.

ISRG makes da Vinci Surgical Systems, which are basically robotic surgical systems. They can perform autonomous procedures (with supervision) as well as aid surgeons in delicate and precision procedures. ISRG also sells the products that go along with the da Vinci systems.

These systems cost around $2 million and annual maintenance (including disposable equipment, etc) runs into the hundreds of thousands of dollars. There has been some controversy over the cost effectiveness of the robots, but their current focus is on minimally invasive surgery.

That makes them ideal for outpatient procedures as well as some heart valve surgery. In the latter, da Vinci systems allow for a much quicker and safer recovery than traditional open heart surgery.

One of the videos on its website shows a da Vinci stitching a grape back together.

Plenty of Tailwinds for ISRG Stock, But…

ISRG’s timing is spectacular. First we’re entering a new tech wave of artificial intelligence, driverless cars, personal assistants, etc. People are comfortable letting technology take over.

Second, as baby boomers start hitting retirement age, minimally invasive surgery becomes a rite of passage. More pieces start getting wobbly and leveraging robots to do some of the repairs means reduced wait times and more volume for the healthcare provider.

Third, the healthcare sector is all about reducing costs and growing margins. Machines don’t have to carry the costs of malpractice insurance that surgeons have to carry, and when you expand that over a hospital or outpatient facility, that savings alone almost pays for a da Vinci or two.

Fourth, because ISRG was the pioneer in this sector, it has been around enough to develop a very solid reputation. That gives it a substantial competitive moat.

Doctors are not risk takers. They like to see products and technologies develop over time before they feel comfortable adopting them. That has been the case with da Vinci products.

But da Vinici robots have been in place for a while now and more practices are buying in.

And that’s reflected in its Q1 numbers, released in mid-April. Procedures were up 15%. Sales were up from 133 units in Q1 2017 to 185 units in Q1 this year. Revenues were up 25% over the same quarter last year. Systems revenue alone was up 46% for the quarter.

ISRG is certainly pricey, but it continues to grow a strong clip. And it continues to outpace the optimistic analysts.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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