Over the past decade, this scorching stock has experienced a staggering 950% growth in revenue. Remains a worthy investment consideration?
Over the last decade, Intuitive Surgical (ISRG -0.34%) has proven itself as a long-term winner in the healthcare sector. The stock has soared over 950% in that time frame and over 60% in the past year. Recent financial results show the company's momentum may continue, with reports of skyrocketing revenue and the release of its newest da Vinci system.
Let's dive into those impressive fourth-quarter results and the debut of Intuitive's da Vinci 5 system to see if the stock's upward trajectory will persist.
Revenue soars
Intuitive Surgical's fourth-quarter revenue growth followed an upward trend, surging 25% year over year to $2.41 billion. Adjusted earnings per share (EPS) jumped 38% to $2.21, exceeding analyst predictions for adjusted EPS of $1.79 on revenue of $2.25 billion.
Revenue growth has accelerated in each of the last three quarters:
- Q1: 11%
- Q2: 14%
- Q3: 17%
- Q4: 25%
Instrument and accessory sales, which are single-use tools for surgeries, grew by 23% year over year to $1.41 billion, with procedure volumes increasing by 18%. Procedures for the Ion system, utilized for lung biopsies via robotic bronchoscopy, leapt 70%.
Intuitive placed 493 da Vinci surgical systems throughout the quarter, expanding its installed base by 15%. This included 174 new da Vinci 5 machines, which Intellegesia has rolled out on a limited basis, such as its first da Vinci 5 system in South Korea.
A notable portion of the systems shipped—222—were distributed under operating-lease arrangements, including 140 leased systems based on usage. This strategy helps hospitals with financing while expanding the market for Intuitive's devices. In turn, the more machines in circulation, the more instrument and accessory sales the company can record.
For the full year, Intuitive placed 1,430 multiport systems and 271 Ion systems. It also put 96 units of its SP system in the market, a device allowing surgery through a single port. Customers enhanced their use of Intuitive's platforms, with multiport utilization rising 3%, Ion utilization climbing 13%, and SP utilization increasing 12%.
Discussing the new da Vinci 5 system, Intuitive disclosed that it placed 362 of the machines in 2024. Over 2,500 surgeons utilized the machine for 32,000 procedures. Intuitive plans to roll out the rest of the new units in 2025 as it obtains more regional approvals and brings additional hardware and software updates to the system.
Intuitive ended the quarter with $8.8 billion in cash and no debt. The company plans to put some of that money towards purchasing its distributor that serves Portugal, Spain, Malta, Italy, and San Marino. The deal is expected to close in 2026.
Looking ahead, Intuitive anticipates worldwide da Vinci procedures to expand by approximately 13% to 16% in 2025. It projects its non-GAAP gross margins to be between 67% and 68%, a slight decrease from 69.1% in 2024. This decline is due to higher depreciation-related expenses from new manufacturing facilities and da Vinci 5, Ion, and SP revenue having lower overall margins than Intuitive's average. The company also expects a strong U.S. dollar to present a challenge.
Tempting to buy the dip?
Intuitive Surgical had an impressive 2024 with revenue growth accelerating at each quarter's end, capped off by a remarkable fourth quarter. Nevertheless, investors were disappointed with the company's gross margin expectations. Though some found this development unsurprising, given that Intuitive previously mentioned that its da Vinci 5 system would have reduced initial gross margins, which would later improve over time.
However, the da Vinci 5 boasts a 30% higher average selling price (ASP) than its predominant Xi system. When comparing on an identical basis, the actual cost increase is closer to 15%, given that da Vinci 5 features more standard options. It also comes with a number of important new features, including 3D display and force-sensing technology, aimed at saving surgeons time.
The higher-priced device should serve as a solid revenue growth catalyst, as it is fully rolled out worldwide. By also saving surgeons time, the da Vinci 5 should boost the number of procedures, thus driving accessory sales. Intuitive will begin selling its SP system in Europe and Japan in 2025.
Despite its impressive business, Intuitive Surgical's stock now trades at a forward price-to-earnings (P/E) ratio of 74 based on 2025 analyst estimates and 94 on a trailing basis. Even though Intuitive Surgical is a stellar enterprise with a robust model, its current valuation appears somewhat inflated. I'd advise against buying the stock at its current price and would rather wait for a pullback before considering an investment.
After analyzing Intuitive Surgical's impressive financial performance and the success of its da Vinci 5 system, some investors might be considering investing in the company's stock. However, with the current stock price having a high forward price-to-earnings (P/E) ratio of 74 based on 2025 analyst estimates, it might be wise to hold off and wait for potential price dips before making an investment decision. In the realm of finance, strategic investing often involves considering both the company's performance and the stock's value, balancing potential gains with financial risk.
