Reuters Intuitive Surgery: Fantastic company, expensive stock
Intuitive Surgical (NASDAQ 🙂 focuses on innovation to improve the quality and accessibility of minimally invasive care.
The company’s initial offer is its platform for robotic-assisted surgery, which includes the family of The Vinci Surgical Systems. As the volume of robotic surgery worldwide continues to grow, the company’s top and bottom lines have been snowing for years.
As the largest company in the market, Intuitive Surgical has the potential to remain a leader in its industry and has continued its activities and financial expansion.
That said, his stock has become too valuable lately to ignore the risk of a potential valuation contraction. For this reason, I am neutral in stock. (See ISRG stock chart at TipRanks)
The Q2 results of Intuitive Surgical were really impressive, mainly due to the acceleration of the company’s growth. Hospitals were flooded last year as a result of the Kovid-1 pandemic epidemic, which slowed the delivery of intuitive surgical Da Vinci. However, moving towards 2021, intuition is firing on all cylinders.
In Q2, revenue came in at 46 1.46 billion, an increase of 72% year on year. This figure is not only above the pre-covid level of the company, it is also a new quarterly sales record.
The company has distributed 328 Da Vinci systems, up 84% from the same period last year, expanding its installed base by 10% to about 6,335 systems. In a market like Europe, this number is significant considering that Covid-1 and its variants continue to limit hospital capacity.
It is also worth emphasizing the juicy margin of intuitive surgery, which returns to normal very quickly. Stable margins are an essential feature of determining a company’s future profit and its valuation.
Due to the intuitive minimum operation and tidy balance sheet, which does not contain a single dollar of long-term debt, except for its management and research and development, the remaining total profit goes down to the bottom line.
Therefore, Intuitive’s net margin has returned to 35% in its most recent quarter. The company is a cash cow, which after accumulating a quarterly profit, has accumulated a huge cash position of $ 7.7 billion without raising any debt or equity at this time.
The price is hard to swallow
The stock’s valuation has expanded to multiple new heights, which are likely to side-rise in the future. Forward P / E currently stands at 60.6 outside its historical average.
In addition, the company never paid dividends and stated no intention to do so. Therefore, investors should expect to enjoy returns only in the form of capital gains, at least in the medium term.
The company, however, repurchased the shares to return the capital to the shareholders. Buying such high quality stock is less likely to benefit shareholders, although the company may pay extra for its own stock. Therefore, investors should be wary of the current valuation of the stock and its impact on short-term-medium side upward (or negative) prospects.
Tech on Wall Street
Turning to Wall Street, Intuitive Surgical has an average buy consensus rating based on five buy, nine hold and zero sales scheduled over the past three months. At $ 1,012.08, the average ISRG price target indicates a 1% side upward probability.
Disclosure: At the time of publication, Nicholas Sismanis had no position on the securities mentioned in this article.
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