Intuitive Surgical Is a Buy on This Dip

Intuitive Surgical Inc (NASDAQ:ISRG) develops, manufactures and leases robotic surgery machines and accessories. Its da Vinci Surgical Systems brand is one of the biggest names in this fast-growing sector.

ISRG Stock: Intuitive Surgical Is a Buy on This Dip

The stock is off about 9% in the past month, and about half of that happened after it announced earnings last week. While ISRG revenues were in line with expectations, earnings missed by 3%. That was enough to send the stock sliding.

But even after that hit, the stock still sports a trailing price-to-earnings ratio of 53, so it’s cheaper now, but there’s still plenty of faith left in its growth.

That’s apparent in its Q1 report, if you’re interested in looking deeper into the numbers (which we are). First-quarter leases were down for the company, and that is what hamstrung earnings. But procedure growth was up by 18% and installations were around 235 units.

ISRG Stock by the Numbers

So, let’s break this down.

ISRG sells robotic surgical machines that perform minimally invasive surgical (MIS) procedures as well as diagnostics. Basically, this is surgical procedures done with laparoscopy, which is a fair amount of common surgeries. And a surgeon is part of the team, but the da Vinci does a fair amount of the work.

The machines are leased, so there’s recurring income and there are also service contracts for parts and equipment and upkeep. These are the high-margin aspects of the business.

These da Vinci machines had already performed more than 5 million MIS surgeries by 2017, and they’re available in more than 4,400 hospitals worldwide. Because ISRG is one of the first pioneers in this sector, it has a significant competitive advantage since the barriers to entry are significant and it has built a reputation in a very conservative sector.

Generally speaking, the medical profession is not one that jumps from shiny object to shiny object. Whether it is medicines, procedures or equipment, there is a lot to risk, especially in a surgical setting. Surgeons are not interested in getting sued for malpractice or losing hospital privileges.

This is far from the dashcam videos of Tesla drivers throwing their car on Auto Pilot and letting it roll. Because ISRG stock has been around for more than two decades, it has the history and the relationships to show its value and reliability.

There will certainly be competitors as tech advances and its potential market share may be challenged, but the potential market remains vast and can sustain a number of competitors without that eating into ISRG growth opportunities.

And that is precisely where that procedure growth number comes in. That kind of growth shows that these machines are becoming accepted in their environments, which is a very bullish sign for the long term.

My Portfolio Grader rates ISRG a B, and that means, any dip is a reason to buy.

Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough StocksAccelerated Profits and Platinum Growth. His most popular service, Growth Investor, 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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