Intuitive Surgical (ISRG, Financial) has seen tremendous success recently, with its innovative medical robotics rapidly gaining popularity worldwide. The company's third-quarter earnings report was particularly impressive, recording sky-high sales growth and positioning it as one of the best performing health care stocks on the market.
One has to give credit where it is due. Intuitive Surgical's recent performance has been nothing short of exemplary. It is finally recovering after a massive drop in demand during the early stages of the pandemic, when many elective surgeries were delayed. According to Fortune Business Insights, the global medical devices market saw a decline of 1.4% in 2020 as medical practitioners held off on purchases. Now things are returning to normal, and Intuitive Surgical is reaping the benefits.
About Intuitive Surgical
Intuitive Surgical is a leading developer and manufacturer of innovative medical robotics systems, with its main product being the da Vinci Surgical System. Intuitive Surgical has become one of the most trusted names in medical robotics with its cutting-edge technology that allows surgeons to perform complex surgical procedures with precision and ease.
Given the impressive projected growth of the medical robotics market in general, along with Intuitive's other key factors like high procedure and revenue growth, low operating expenses and the ongoing share repurchase program, it's easy to see why Intuitive Surgical has strong popularity with anyone looking to invest in this rapidly evolving industry. Furthermore, with the recent comeback of robotic surgeries after a brief downturn in the beginning of the pandemic, it's clear that Intuitive Surgical's near-term outlook is great. This company is poised for success.
Recent earnings
For the third quarter, the company reported an increase of 11% in revenue over the same period last year to $1.56 billion. Meanwhile, adjusted earnings per share were $1.19 and topped Wall Street analysts' projections of $1.12. This growth can be attributed to several factors, including Intuitive Surgical's strong financial position and commitment to innovation and quality. The company is debt-free and has $7.4 billion in cash on its books. Furthermore, thanks to the continued popularity of Intuitive Surgical's products, the company has also seen steady growth in revenues from instruments and accessories. Previously, the company had estimated between 14% and 16.5% growth for the fiscal year 2022, but now it is projecting 17% to 18%.
Intuitive Surgical continues to be a leader in the minimally invasive robotic surgery field, offering hospitals and patients access to world-class care with life-changing results. The recent results confirm it remains a strong performer during market volatility.
Intuitive Surgical will continue to benefit from a growing market
The global medical devices market experienced significant disruption due to the Covid-19 pandemic. This decline, reported at 1.4% for 2020, was largely attributed to reduced demand for elective surgeries. However, despite this setback, market analysts are projecting robust growth for this sector, with the market expected to reach $495.46 billion for 2022 and $718.92 billion by 2029 according to estimates from Fortune Business Insights.
The main drivers of this growth are increased demand for portable medical devices among the public and growing investment in R&D by major industry players. Moreover, certain key trends in the medical devices industry are also contributing to this development: the rising prevalence of chronic diseases worldwide, a steady increase in both diagnostic and inpatient procedures performed annually and improved diagnostic technologies that allow patients to receive quick and reliable diagnoses. Overall, it is clear that despite current challenges, the medical devices market has ample potential for continued growth in the years ahead, though I should caution most of this expected growth appears to be outside of Intuitive Surgical's realm of expertise.
Thanks to its well-entrenched position, Intuitive Surgical can maintain a competitive edge over smaller up-and-coming companies looking to gain a foothold in robotic surgeries. Furthermore, Intuitive Surgical's commitment to quality and customer satisfaction has helped it build strong relationships with hospitals and medical professionals, solidifying its reputation as an industry leader.
Well-diversified business model
Intuitive Surgical is one of the most dominant health care companies in the world, with products sold in over 67 countries. Despite its focus on robotic surgeries, the company has achieved diversification through its global reach. In fact, during the third quarter alone, Intuitive Surgical placed 175 systems in these key regions. Non-U.S. currencies accounted for over 20% of its total revenue during this period.
Intuitive Surgical also has a new product on the market that revolutionizes how surgical procedures are performed. The da Vinci single-port surgical system utilizes advanced robotics and camera technology to allow surgeons to access deep tissue and organs with a single, small incision. Thanks to its versatile design, this cutting-edge system can be used in various surgeries, including those related to the head and neck, thorax, gynecology, general surgery and urology. In September, Japan's Ministry of Health, Labour and Welfare approved the da Vinci single-port surgical system for use in surgeries.
Over the past several years, Intuitive Surgical has rapidly expanded its global reach, with regulatory approvals for its technologies in North America, South Korea and Japan.
This rapid pace of adoption and innovation is very promising for investors.
Valuation
Despite the recent challenges posed by the pandemic, Intuitive Surgical remains well-positioned for long-term success. With its proven track record of strong performance, Intuitive Surgical has consistently demonstrated that it is a profitable and viable company. Furthermore, given the unprecedented nature of the Covid-19 crisis, Intuitive Surgical's ability to weather severe shifts in demand or unexpected supply pressures will be critical to its continued success.
The only issue for investors now is the valuation. While Intuitive Surgical is undoubtedly one of the leaders in robotic surgery, its shares are trading at a price-earnings ratio of 62.76, making it significantly more expensive than many of its peers in the medical devices industry. Furthermore, this high valuation is well above Intuitive Surgical's average price-earnings ratio over the past 10 years, which has averaged just 44.4. Personally, I would wait for a more attractive entry point.
