We came across a bearish thesis on Intuitive Surgical, Inc. (ISRG) on Kroker Equity Research’s Substack by Kroker Equity Research. In this article we will summarize the bulls’ thesis on ISRG. ISRG Technologies, Inc. share was trading at $489.86 as of Sept 13th.
A medical technician using surgical robotics to perform minimally-invasive urologic surgery in an operating room.
Intuitive Surgical (ISRG) is a leading American company specializing in robotic-assisted surgical systems, most notably the da Vinci Surgical System, which enables surgeons to perform minimally invasive surgeries with enhanced precision, flexibility, and control. Founded in 1995 and based in Sunnyvale, California, the company has revolutionized surgery by integrating advanced robotics, imaging, and artificial intelligence. The da Vinci system comprises a surgeon’s console, a patient-side cart with robotic arms, and a 3D vision system, allowing for greater accuracy through small incisions. This technology is used in a variety of procedures, including urology, gynecology, cardiothoracic surgery, and general surgery, reducing recovery times and complications for patients.
Intuitive Surgical’s impressive growth has made it a leader in the field, with its systems widely adopted in hospitals and medical centers worldwide. Over the past decade, the company has achieved a 10-year average return on invested capital (ROIC) of 21.22%, driven by a 10-year revenue compound annual growth rate (CAGR) of 14.06%. Its diluted earnings per share (EPS) before extraordinary items grew at a 10-year CAGR of 15.71%, further cementing its strong financial performance. The company’s balance sheet is equally robust, with a net debt/EBITDA ratio of -1.99, indicating a debt-free position and ample liquidity. Intuitive Surgical has rewarded its investors with an astounding total return of 831% over the last decade.
Despite these impressive metrics, two concerns loom over the company’s future growth. The first is its high valuation, with a forward P/E ratio of 68.59. While EPS is expected to grow at a forward 2-year CAGR of 15.84%, the valuation appears steep, suggesting the market has already priced in substantial growth. The second concern is uncertainty regarding the future of the surgical robotics market. Although Intuitive Surgical continues to innovate, the long-term demand for its systems remains difficult to predict. The current high valuation implies that investors expect sustained high growth, but it is unclear whether the market can maintain these expectations indefinitely.
Intuitive Surgical, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 67 hedge fund portfolios held ISRG at the end of the second quarter which was 79 in the previous quarter. While we acknowledge the risk and potential of ISRG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ISRG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.