Intuitive Surgical Inc. (ISRG, Financial) has had an eventful trading period, with a daily gain of 2.2%, offset by a three-month loss of 8.09%. The company's Earnings Per Share (EPS) (EPS) stands at 3.99. But the real question is, is the stock modestly undervalued? This article aims to provide an insightful valuation analysis of Intuitive Surgical (ISRG) to determine its true worth. Let's delve into the company's finances, operations, and market performance to answer this question.
A Glimpse into Intuitive Surgical Inc. (ISRG, Financial)
Intuitive Surgical develops, produces, and markets a robotic system for assisting minimally invasive surgery. It also provides the instrumentation, disposable accessories, and warranty services for the system. The company has placed more than 8,000 da Vinci systems in hospitals worldwide, with nearly 5,000 installations in the U.S. and a growing number in emerging markets. With a stock price of $302.05 and a GF Value of $361.57, the company appears to be modestly undervalued. This valuation sets the stage for a deeper exploration of the company's value.
Understanding the GF Value
The GF Value is a proprietary measure that reflects the intrinsic value of a stock. It takes into account historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus Value calculation, Intuitive Surgical's stock shows every sign of being modestly undervalued. The stock's current price of $302.05 per share and the market cap of $106.10 billion suggest that the stock is trading below its fair value. This undervaluation implies that the long-term return of Intuitive Surgical's stock is likely to be higher than its business growth.
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Intuitive Surgical's Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss for investors. To mitigate this risk, investors must review a company's financial strength before purchasing shares. The cash-to-debt ratio and interest coverage are great ways to understand a company's financial strength. Intuitive Surgical has a cash-to-debt ratio of 10000, which ranks better than 99.88% of 841 companies in the Medical Devices & Instruments industry. The overall financial strength of Intuitive Surgical is 10 out of 10, indicating strong financial health.
Profitability and Growth of Intuitive Surgical
Companies that have been consistently profitable over the long term offer less risk to investors. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Intuitive Surgical has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $6.70 billion and Earnings Per Share (EPS) of $3.99. Its operating margin is 24.34%, which ranks better than 87.85% of 831 companies in the Medical Devices & Instruments industry. Overall, the profitability of Intuitive Surgical is ranked 10 out of 10, indicating strong profitability.
Growth is one of the most important factors in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Conversely, if a company's revenue and earnings are declining, the value of the company will decrease. Intuitive Surgical's 3-year average revenue growth rate is better than 61.23% of 730 companies in the Medical Devices & Instruments industry. However, its 3-year average EBITDA growth rate is 6.8%, which ranks worse than 53.66% of 738 companies in the Medical Devices & Instruments industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Intuitive Surgical's ROIC was 16.91, while its WACC came in at 14.12.
Conclusion
In conclusion, the stock of Intuitive Surgical (ISRG, Financial) shows every sign of being modestly undervalued. The company's financial condition is strong, and its profitability is robust. However, its growth ranks worse than 53.66% of 738 companies in the Medical Devices & Instruments industry. To learn more about Intuitive Surgical stock, you can check out its 30-Year Financials here.
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