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Intuitive Surgical Has Stellar Performance, but Is Priced to Perfection
ISRGIntuitive(ISRG) Gurufocus·2024-09-20 13:01

Core Viewpoint - Intuitive Surgical Inc. has shown strong financial performance and growth potential, particularly with the success of its next-generation Da Vinci 5 robotics system, but the stock appears overvalued given its current price levels [1][21][22]. Financial Performance - The company has consistently outperformed earnings expectations, with recent beats ranging from 3.02% to 40.72%, including a 14.69% beat in the latest quarter [2][21]. - In Q2 2024, Intuitive Surgical reported a 17% year-over-year increase in procedures and a 14% growth in the installed base of Da Vinci systems, contributing to a 14% increase in sales to 2.01billion[4][5][21].Thegrossmarginforthecompanystandsatanimpressive702.01 billion [4][5][21]. - The gross margin for the company stands at an impressive 70%, indicating strong profitability despite concerns about potential slowdowns [5][21]. Growth Drivers - The next-generation Da Vinci 5 system is a significant growth driver, featuring enhanced precision and efficiency, with a higher average selling price that supports revenue growth [7][21]. - The company is expected to see a procedure growth forecast of 15.50% to 17% for the year, indicating robust demand beyond pandemic-related backlogs [5][21]. Profitability Metrics - Intuitive Surgical boasts exceptional profitability metrics, with a gross margin of nearly 67% and an operating margin of 26%, well above industry averages [8][21]. - The company maintains a net margin of almost 28%, reflecting superior cost control and operational efficiency [8][9]. Financial Strength - The company has zero debt and a strong equity-to-asset ratio of 0.88, providing flexibility for future investments and acquisitions [9][21]. - A DuPont analysis reveals a return on equity (ROE) of 14.77%, with an asset turnover of 0.50 times, indicating efficient asset utilization [9][21]. Future Projections - Revenue is projected to grow from 8.09 billion in 2024 to 10.83billionby2026,reflectingacumulativeincreaseof3.8710.83 billion by 2026, reflecting a cumulative increase of 3.87% and an annualized growth rate of approximately 15.08% [16][21]. - Earnings per share (EPS) is expected to rise from 5.71 in 2024 to 8.94by2026,markingasubstantial56.558.94 by 2026, marking a substantial 56.55% increase [16][21]. Valuation Concerns - The stock is currently trading around 494, which is above its GF Value of $439.30, indicating potential overvaluation [18][22]. - The price-earnings ratio stands at 84.88, significantly higher than its peers, suggesting high investor expectations with little margin for error [20][22].