Purchasing Shares of Intuitive Surgical Corporation (ISRG)
Purchasing shares in Intuitive Surgical (ISRG, 1.71%) translates into investing in the global forefront of robotic-assisted, minimally invasive surgical technology. Worldwide, Intuitive Surgical's da Vinci Surgical Systems are employed in over 70 clinical applications.
Despite the attention-grabbing systems, the majority of Intuitive Surgical's income originates from instrument sales, accessories, operational leases, and services linked to the da Vinci systems. Consequently, the company boasts a durable, lucrative, recurring revenue stream for numerous years, rendering it an appealing investment choice.
The following guide walks you through the process of purchasing Intuitive Surgical stock and highlights significant factors to consider before making an investment.
Procedure for buying Intuitive Surgical stock
Acquiring Intuitive Surgical stock
Intuitive Surgical stocks are traded on the Nasdaq exchange (listed as ISRG). The daily trade volume generally hovers around 1.3 million shares. The market capitalization is £194 billion at the time of this writing. Given its fluidity, Intuitive Surgical stock can be acquired efficiently from trusted brokers.
Stock identifier
A concise alphanumeric string that represents a company's stock for trading purposes, visible on financial platforms. In the event that you are a novice investor, the procedure to buy Intuitive Surgical stock (or any publicly traded stock) is outlined below:
- Create a brokerage account with a reputable financial institution.
- Examine the stock thoroughly by using sources including our Website to assess the stock's risk/reward profile and determine whether the risk is acceptable for your investment plan.
- Establish a budget and determine the quantity you desire to invest in Intuitive Surgical stock or potentially in a portfolio with Intuitive Surgical as part of a diversified portfolio to spread stock-specific risk across multiple positions. Alternatively, you might determine whether to make a single investment in the stock or to distribute funds into your portfolio gradually, a tactic known as dollar-cost averaging.
- Place an order for the desired number of shares. You can opt for either a market order or a limit order. The Fool suggests a market order, as it will usually be filled immediately at the current price. Once placed, you become an Intuitive Surgical shareholder.
Shareholder
An individual or entity that owns a fraction of a company's stock, granting them a share of the company's profits and assets.
Question: Is an investment in Intuitive Surgical stock advisable?
Considering an investment in Intuitive Surgical stock
Intuitive Surgical is a growth stock. While the distinction between growth stocks and value stocks can be arbitrary, growth stocks tend to offer their value primarily through their future earnings and cash flow streams.
Intuitive Surgical does not provide dividends, so it may not be suitable for income investors. Furthermore, it is not an investment suitable for those seeking the elevated returns and risk associated with early-stage technology companies.
In contrast, Intuitive Surgical is a well-established company with a substantial market share and genuine earnings, boasting excellent long-term growth prospects. While every stock entails some risk, the risk associated with Intuitive Surgical arises from the possibility that its future growth may not meet the expectations embedded in its lofty valuation.
Let's explore the company's significant growth potential. For Intuitive Surgical, this means increasing the number of da Vinci Surgical Systems deployed globally and augmenting instruments, accessory, and service sales.
Considering that the average selling price of a da Vinci system falls between £500,000 and £2,500,000, with approximately 5,600 systems installed in the US and 4,000 internationally as of September 2024, every new surgical procedure performed on a da Vinci system brings £600 to £3,500 in instruments and accessory revenue to Intuitive Surgical. This revenue model is referred to as the "razor-and-blade" model, and it brings significant recurring revenue to the company every year on a contract basis for each new system. Additionally, each new system opens the door for more surgeries and subsequently additional instruments and accessory revenue. Instruments and accessory revenue can expand due to a higher number of procedures per system and an expansion of clinical applications.
Some methods for increasing the sale of da Vinci Surgical Systems include geographical expansion beyond the company's US market, offering more leasing agreements to encourage hospitals and surgical centers to opt for leases rather than purchasing the systems outright, and regularly releasing new models to induce customers to upgrade their equipment. Furthermore, the company can improve the quality and availability of learning and training materials to bolster confidence in potential system users, particularly those outside the United States. Lastly, expanding the types of surgical applications (procedures) can reduce the cost per customer, making da Vinci Systems more attractive.
The company is progressing towards its objectives. For instance, the global installation count of da Vinci systems increased by 14% in 2023. Worldwide, the use of da Vinci systems in procedures saw a growth of 22% in 2023.
Financial Performance
Is Intuitive Surgical financially sound?
Intuitive Surgical is a financially robust healthcare corporation with an operating income of $1.8 billion in 2023. With its expanding base of da Vinci systems, service revenue, and increasing recurring revenue, it's likely to boost sales and earnings for years to come.
However, the topic isn't merely about its profitability or potential earnings growth. Rather, it's about deciding the suitable valuation for the company's future earnings. I'll discuss this in the conclusion section.
The primary source of the company's profits is its nonrecurring revenue, which is essential for its long-term earnings. The good news is that it's growing as a proportion of total revenue (increased from 70% in 2015 to 83% in 2023), indicating a strong demand for the use of its systems in procedures.
An aging population could lead to an increase in procedures. Its less invasive and more secure robotic-assisted technology could also stimulate an increase in procedures. For example, if a particular procedure is more cost-effective using a da Vinci system, this could incentivize more surgical centers to perform them. Similarly, if the da Vinci system makes procedures more secure, patients/surgeons will feel more comfortable carrying them out. A higher surgeons' productivity due to using robotic-assisted technology will also enable them to perform more procedures.
Additionally, less invasive procedures will result in better patient outcomes and potentially lower costs. Patients may opt for centers with da Vinci systems and avoid traditional procedures - a motivating factor for centers to adopt the system.
These factors suggest the potential for Intuitive Surgical to grow procedures performed using da Vinci. The company concentrates on five key surgical specialties, which include:
- General surgery, including hernias, colorectal, and bariatric surgery
- Urologic surgery, including the fast-growing prostatectomy (surgery with a high average age) market
- Gynecologic surgery, including hysterectomies
- Cardiothoracic surgery
- Head and neck surgery
Management believes "there are numerous additional applications that can be addressed using the da Vinci Surgical System," and this is a trend investors should consider. The company has a strong market presence, a robust relationship with surgeons, and develops its solutions in consultation with them.
Moreover, it's an industry with high barriers to entry. It necessitates significant capital investment and expertise, as well as clinical trials and regulatory approval for a product whose safety and efficacy are paramount. Intuitive Surgical also holds over 4,300 patents for its technology, with another 2,100 patents pending worldwide.
Training surgeons to use and become comfortable with the da Vinci system is a time-consuming and labor-intensive process. This makes it tricky for them to switch to a new system if one becomes available.
Dividends
Does Intuitive Surgical pay dividends?
As a growth-oriented company, it doesn't provide dividends and probably won't in the near future.
ETF options
ETFs with exposure to Intuitive Surgical
Intuitive Surgical's stock is extensively held by asset managers, such as Vanguard Group, BlackRock (BLK -0.17%), T. Rowe Price (TROW 0.64%), and State Street (STT -0.94%). It's also a relatively small holding in Cathie Wood's ARK Autonomous Technology and Robotics ETF ($10.3 million as of early December 2024).
Exchange-Traded Fund (ETF)
An exchange-traded fund, or ETF, allows investors to purchase multiple stocks or bonds at once. The company's exposure to healthcare and robotics makes it a favorite among medical- and technology-focused investors. For instance, Intuitive Surgical is the third-largest holding in the iShares U.S. Medical Devices ETF (IHI 1.11%) and the second-largest in the Global X Robotics & Artificial Intelligence ETF (BOTZ 1.61%).
Stock splits
Will Intuitive Surgical stock split?
Management has already conducted three stock splits thus far. This included a 1:2 split in 2003 when the price was less than $2 a share, followed by a 3:1 split in the summer of 2017 and another 3:1 split in May 2021. The last two splits were due to the substantial increase in the stock price over the previous few decades (a 22,400% increase since the start of 2003).
Given that the stock price was around $539 a share as of late 2024, management might consider another stock split due to the significant growth in the share price.
While you can't directly invest in Tiktok, there are alternate avenues. Let's delve into the intricacies in this write-up.**## The Crux of the Matter
The Crux of the Situation for Intuitive Surgical's Stock
Intuitive Surgical boasts an unchallenged first-mover advantage in the market, coupled with a formidable competitive barrier. This suggests a prolonged period of earnings growth for the company. The company's pace of system placements continues to surge by double digits, and the outlook for surgical and da Vinci procedures remains optimistic.
An aging population and the superior safety and efficacy of the technology are poised to fuel a surge in da Vinci procedures. This promises a stream of lucrative instruments and accessories in the future. The company's management is adept at fostering growth through operating leases, boosting recurring revenue, and developing new products to encourage trade-ins.
The world often mirrors the U.S.'s lead in healthcare and medical equipment, suggesting a long-term expansion for system placements beyond U.S. borders. There's much to commend in the company, which is why the market is willing to shell out a premium for its stock - trading at approximately 87 times its current earnings as of December 2024.
Though this valuation might seem steep, high-quality growth stocks seldom come with a valuation that appeases most investors. Regardless, even if you're skeptical about the current valuation, it's a stock worth keeping an eye on during market downturns.
Frequently Asked Questions
Questions on Investing in Intuitive Surgical
Is Intuitive Surgical a publicly traded company?
Yes, it's a publicly listed company, listed on the Nasdaq exchange, with the ticker ISRG.
Is Intuitive Surgical a solid investment choice?
Intuitive Surgical is a stock that could appeal to investors seeking high-growth potential and who are optimistic about the long-term prospects.
Lee Samaha has no position in any of the stocks mentioned. Our Website has positions in and recommends Intuitive Surgical. Our Website recommends T. Rowe Price Group. Our Website has a disclosure policy.
Given the company's focus on recurring revenue and its strong financial performance, consider setting aside funds for investing in Intuitive Surgical stock's potential growth.
As a growth stock, Intuitive Surgical's success is largely dependent on its future earnings and cash flow streams. Investors looking for income options might want to explore other stock choices.
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