More Upside For ISRG Stock?

Core Insights - Intuitive Surgical reported strong Q4 2025 results with adjusted EPS of $2.53, exceeding estimates of $2.26 and increasing by 14.5% from Q4 2024's $2.21 [2] - Revenue reached $2.87 billion, a 19% year-over-year increase, surpassing the consensus of $2.75 billion, while full-year revenue hit $10.1 billion (+21%) [2][4] - The current price of approximately $526 reflects a valuation of 59x trailing adjusted EPS of $8.93, consistent with its five-year average of 60x [2][6] Q4 Performance - Global da Vinci procedures increased by 18%, with U.S. general surgery gains and a 23% growth internationally [4][8] - Recurring revenue accounted for 81% of total revenue at $2.3 billion, rising by 20%, highlighting the strength of the annuity model [4] - Pro forma operating margins reached 37%, with GAAP income from operations at $864 million [4] 2026 Guidance - Management projects global procedure growth of 13%-15%, a slowdown from 2025's 18%, with adjusted EPS guidance of $9.80-$10.00 indicating growth of 10%-12% [6] - The cautious outlook may present a buying opportunity despite the slowdown narrative [6] Valuation Considerations - The historical average valuation of 60x seems comfortable, yet high-teens growth in procedures and industry-leading margins suggest a potential premium is warranted [6] - The strong fundamentals from Q4 results suggest potential for multiple expansion from the current 59x valuation [7] Financial Strength - Annual free cash flow doubled to $2.5 billion from $1.3 billion, funding $2.3 billion in share repurchases at an average price of $478 [8] - Pro forma net income reached $914 million in Q4, an increase from $805 million in the previous year [8] Growth Drivers - Opportunities for growth include surpassing the 13%-15% guidance through the ramp of da Vinci 5, increased international market penetration, and new indications [9] - The strength of free cash flow supports returns while financing R&D [9]