Intuitive Surgical Inc (ISRG, Financial) saw a daily gain of 3.66%, contrasting with a 3-month loss of 17.95%. Its Earnings Per Share (EPS) stands at 3.99. The question we aim to answer is, is the stock modestly undervalued? Follow us as we embark on an in-depth analysis of Intuitive Surgical's valuation.
A Glimpse into Intuitive Surgical Inc
Intuitive Surgical Inc (ISRG, Financial) is a leading developer, producer, and marketer of a robotic system for assisting minimally invasive surgery. The company also provides the instrumentation, disposable accessories, and warranty services for the system. With over 8,000 da Vinci systems placed in hospitals worldwide, nearly 5,000 of which are in the U.S., Intuitive Surgical is making a significant impact in the medical industry.
Comparing the stock price of $276.69 and the GF Value of $366.42, it seems that the stock might be modestly undervalued. Let's delve deeper into the company's valuation.
Understanding the GF Value of Intuitive Surgical
The GF Value is a unique tool that calculates the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line represents the fair value at which the stock should ideally trade.
According to our analysis, Intuitive Surgical's stock appears to be modestly undervalued. The GF Value estimates the stock's fair value based on historical multiples, an internal adjustment based on past business growth, and analyst estimates of future business performance. If the share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the share price is significantly below the GF Value Line, the stock may be undervalued and have higher future returns.
With its current price of $276.69 per share, Intuitive Surgical stock seems to be modestly undervalued. As such, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength of Intuitive Surgical
Companies with robust financial strength offer investors a lower risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. The cash-to-debt ratio and interest coverage of a company are great ways to understand its financial strength.
Intuitive Surgical has a cash-to-debt ratio of 10000, ranking better than 99.64% of 831 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 for investors. Higher profit margins usually indicate a better investment compared to a company with lower profit margins. Intuitive Surgical has been profitable 10 years over the past decade. 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%, ranking better than 88.06% of 829 companies in the Medical Devices & Instruments industry. Overall, the profitability of Intuitive Surgical is ranked 10 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Intuitive Surgical is 11.2%, ranking better than 60.74% of 726 companies in the Medical Devices & Instruments industry. However, the 3-year average EBITDA growth rate is 6.8%, which ranks worse than 54.47% of 727 companies in the same industry.
ROIC vs WACC of Intuitive Surgical
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average 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 return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Intuitive Surgical's ROIC is 16.91 while its WACC came in at 14.75.
Conclusion
Overall, Intuitive Surgical (ISRG, Financial) stock appears to be modestly undervalued. The company's financial condition is strong, and its profitability is robust. However, its growth ranks worse than 54.47% of 727 companies in the Medical Devices & Instruments industry. To learn more about Intuitive Surgical stock, check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
