Key takeaways
View moreIntuitive Surgical's current valuation appears slightly overvalued due to its high EV/EBITDA ratio of 66.18 compared to the industry average of 37.91, despite strong financial performance and market leadership. While the company's robust recurring revenue and growth prospects provide support for a premium valuation, the expected margin pressure in 2025 and increasing competition, particularly in China, suggest that current multiples may be pricing in overly optimistic scenarios.
- Intuitive Surgical's revenue growth is driven by increased da Vinci system placements and procedure growth, with full year 2024 revenue reaching $8.4 billion, a 17% increase year-over-year.
- The company's profitability is strong, with a gross profit margin of 68.04% in Q4 2024 and Return on Average Assets (ROA) of 13.52%, significantly exceeding industry averages.
- Margin pressure is expected in 2025 due to increased depreciation, product mix, and FX headwinds, with pro forma gross profit margin projected to be between 67% and 68% of net revenue.
- Intuitive Surgical faces increasing competition, particularly in China, which could lengthen selling cycles and impact market share, as well as potential tariffs that could impact the business.
- The company is focused on strategic initiatives including the full launch of da Vinci 5, geographic expansion, and digital innovation to drive future growth.
- ISRG's Enterprise Value to EBITDA ratio is high at 66.18 compared to an industry average of 37.91, reflecting its premium valuation.
- ISRG's stock has shown periods of outperformance compared to peers, but recent underperformance and higher volatility suggest caution.
- Management anticipates procedure growth between 13% and 16% in 2025, indicating continued confidence in the company's growth prospects.
- The company's financial stability is supported by its strong cash position and cash flow generation, with net operating cash flow increasing to $822.6 million in Q4 2024.
- Key risks include macroeconomic uncertainty, regulatory challenges, and potential product liability lawsuits, requiring careful monitoring.
Evaluation summary
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Company Overview:
- Intuitive Surgical, Inc. (ISRG) is a leader in robotic-assisted surgical solutions, offering the da Vinci Surgical System and the Ion Endoluminal System. The da Vinci system facilitates minimally invasive surgery using robotic, computational, and imaging technologies, while the Ion system is used for minimally invasive lung biopsies.
- The company's key customers include hospitals, healthcare providers, and surgeons specializing in general, gynecologic, urologic, cardiothoracic, and head/neck surgery. Revenue is generated through system sales, leases, and recurring revenue from instruments, accessories, and services. The company generated $8.4 billion in revenue in 2024, with 84% being recurring revenue.
- Benchmarks for comparative analysis include the Health Care Select Sector SPDR Fund (XLV), and industry peers include Stryker Corp. (SYK) and Abbott Laboratories (ABT).
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Financial Performance:
- Intuitive Surgical has demonstrated consistent revenue growth, with quarterly revenue increasing from $1.89 billion in Q1 2024 to $2.41 billion in Q4 2024. Full year 2024 revenue reached $8.4 billion, a 17% increase year-over-year.
- Net income has also shown growth, with Q4 2024 net income at $685.7 million, compared to $544.9 million in Q1 2024. Net income grew by 29% in 2024 compared to 2023.
- The company's gross profit margin was 68.04% in Q4 2024, up from 65.87% in Q1 2024. Pro forma gross margin improved to 69.1% for the full year 2024 and was 69.5% for Q4.
- Intuitive Surgical's Return on Average Assets (ROA) was 13.52% in Q4 2024, Return on Average Total Equity (ROE) was 15.62%, and Return on Average Total Capital was 15.57%. These figures significantly exceed the industry averages of -37.64%, -140.68%, and -46.04%, respectively, indicating superior profitability and efficiency.
- The earnings call highlighted that gross margin is expected to decline in 2025 due to increased depreciation, product mix, and FX headwinds.
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Operational Efficiency:
- Total current assets increased from $7.11 billion as of December 31, 2024, from $7.63 billion as of March 31, 2024. Total current liabilities also increased from $1.38 billion to $1.75 billion over the same period.
- Working capital decreased from $6.26 billion as of March 31, 2024, to $5.37 billion as of December 31, 2024.
- Net operating cash flow increased from $265.4 million in Q1 2024 to $822.6 million in Q4 2024.
- Free cash flow to equity increased from $23.5 million in Q1 2024 to $510.6 million in Q4 2024.
- Capital expenditures increased from $241.9 million in Q1 2024 to $312.0 million in Q4 2024. Depreciation, depletion, and amortization increased from $109.3 million to $118.4 million over the same period.
- The company does not pay cash dividends. Change in capital stock was $61.9 million in Q4 2024.
- The current ratio decreased from 5.55 in Q1 2024 to 4.07 in Q4 2024, but remains above the industry average of 4.35. The quick ratio decreased from 4.61 to 3.22 over the same period, but remains near the industry average of 3.69.
- The total debt to total equity ratio increased from 0.00 in Q1-Q3 2024 to 0.89 in Q4 2024, but remains significantly below the industry average of 166.10.
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Growth Opportunities:
- Intuitive Surgical is focused on expanding indications and launching new platforms, such as the da Vinci 5. The company placed 362 da Vinci 5 systems in 2024, with over 2,500 surgeons performing over 32,000 procedures on the platform.
- The company is also focused on increasing adoption of focused procedures by country and continuing progress in building industrial scale and manufacturing optimization.
- Geographic expansion is a key growth driver, with the company focusing on international markets, particularly with Ion and SP platforms. The acquisition of the da Vinci business in Italy, Spain, and Portugal is aimed at developing closer customer relationships.
- The company is investing in digital tools and features for the da Vinci platform to enhance surgeon experience and improve patient outcomes.
- The company is expanding its manufacturing footprint with new facilities for da Vinci 5 and Ion systems, as well as endoscope manufacturing.
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Recent Developments and Market Sentiment:
- The successful launch and adoption of the da Vinci 5 platform is crucial for driving revenue growth and maintaining a competitive edge. The company placed 362 da Vinci 5 systems in 2024, with over 2,500 surgeons performing over 32,000 procedures on the platform.
- Intuitive Surgical faces increasing competition, particularly in China, which could lengthen selling cycles and impact market share.
- The company is closely monitoring potential tariffs and their impact on the business.
- The rise in GLP-1 medications has modestly impacted bariatric procedure volumes.
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Risks and Threats:
- Macroeconomic and geopolitical uncertainty, including supply chain disruptions, inflation, and interest rate hikes, pose risks to customer demand and the company's operations.
- Regulatory risks related to obtaining and maintaining product approvals, clearances, and certifications are ongoing concerns.
- The company faces potential product liability lawsuits and commercial litigation matters.
- Increasing competition from new entrants and pricing pressures, particularly in China, could impact Intuitive's market share and pricing power.
- The company relies on sole- and single-sourced suppliers for critical components, creating supply chain vulnerabilities.
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Valuation Analysis:
- The Enterprise Value to EBITDA ratio for Intuitive Surgical is high compared to the industry average. As of December 31, 2024, the ratio was 66.18, compared to an industry average of 37.91.
- The Enterprise Value to Sales ratio is also high, at 22.29 compared to an industry average of 13.92.
- Potential catalysts include the full launch of da Vinci 5, increased adoption of focused procedures, and continued progress in building industrial scale and manufacturing optimization.
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Price Performance:
- Intuitive Surgical's stock price has fluctuated between $451.58 and $608.48 from February 14, 2025, to April 14, 2025.
- Over the past year, ISRG has significantly outperformed both SYK and ABT, with a return of 29.88% compared to 5.18% and 19.32%, respectively. However, year-to-date, ISRG is underperforming, with a return of -6.47% compared to SYK's -1.25% and ABT's 13.39%.
- ISRG has demonstrated periods of both outperformance and underperformance compared to the Health Care Select Sector SPDR Fund (XLV).
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Future Outlook:
- For 2025, Intuitive anticipates procedure growth between 13% and 16%.
- Pro forma gross profit margin is expected to be between 67% and 68% of net revenue.
- Pro forma operating expense growth is projected to be between 10% and 15%.
- Capital expenditures are expected to range from $650 million to $800 million.
- The pro forma income tax rate is estimated to be between 22% and 23%.
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Summary:
- Intuitive Surgical exhibits strong financial health, characterized by consistent revenue growth, high profitability, and a conservative capital structure. The company's investments in R&D and manufacturing capacity are expected to drive future growth.
- Key strengths include its leading position in the robotic-assisted surgery market, strong recurring revenue, and innovative product pipeline. Weaknesses include expected margin pressure in 2025 and increasing competition.
- Opportunities include geographic expansion, increased adoption of focused procedures, and digital innovation. Threats include macroeconomic headwinds, regulatory risks, and potential product liability lawsuits.
- The company's financial stability is supported by its strong cash position and cash flow generation.
- Critical factors for future performance include the successful launch of da Vinci 5, effective cost management, and navigating competitive pressures.
- Areas requiring further monitoring include gross margin trends, competitive landscape in China, and potential impact of tariffs.
- Overall, Intuitive Surgical presents a profile of high growth potential coupled with higher risk. The company's high valuation reflects its strong market position and growth prospects, but investors should be aware of the potential risks and challenges.
Price history
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Fundamentals
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Insights
- Intuitive Surgical exhibits strong financial health, characterized by consistent revenue growth, high profitability, and a conservative capital structure.
- The company's investments in R&D and manufacturing capacity are expected to drive future growth, but may also put pressure on margins and cash flow.
- Increasing competition and macroeconomic headwinds pose potential risks to the company's future performance, requiring a focus on cost management and strategic capital allocation.
Analysis
- Revenue
- Revenue has shown consistent growth, driven by increased procedure volumes and system placements.
- The company's revenue growth aligns with management's focus on expanding indications and launching new platforms.
- Sales/revenue, in millions is greater than the industry average.
- Profitability
- The company exhibits strong profitability, with high net profit and EBITDA margins.
- Profitability ratios are significantly higher than the industry average, indicating efficient use of resources.
- The company's improved gross margins reflect its progress in building industrial scale and manufacturing optimization.
- Liquidity
- The company maintains a strong liquidity position, as indicated by its healthy current and quick ratios.
- The current ratio is decreasing, but remains at a healthy level.
- The company's liquidity ratios are comparable to the industry average.
- Solvency
- The company has a conservative capital structure with low debt levels, indicating strong solvency.
- The total debt to total equity ratio is increasing, but remains relatively low.
- The company's leverage ratios are significantly lower than the industry average.
- Operational Efficiency
- The company demonstrates efficient asset utilization, as evidenced by increasing accounts receivable and inventory.
- Gross profit margin and EBITDA margin have been increasing, indicating improved operational efficiency.
- The company's ability to control operating expenses and improve margins is a positive sign for its long-term financial performance.
- Cash Flow Analysis - The company generates strong cash flow from operations, which supports its capital expenditures and strategic investments. - Capital expenditures have increased, supporting the expansion of manufacturing facilities and R&D efforts. - The company's free cash flow margin has remained consistently positive, indicating strong profitability and cash flow generation.
- Risk Factors
- Potential risks include macroeconomic and geopolitical uncertainty, regulatory risks, product liability lawsuits, competition, and reliance on sole- and single-sourced suppliers.
- Gross margins are expected to decline in 2025 due to increased depreciation, product mix, and FX headwinds, requiring focus on cost management and product margin improvements.
- The company faces increasing competition, particularly in China, which could lengthen selling cycles and impact market share.
- Future Outlook
- Continued revenue growth is expected, driven by the full launch of da Vinci 5 and increased adoption of focused procedures.
- The company's investments in R&D and commercial initiatives are expected to drive future growth.
- The company's ability to generate consistent free cash flow will be critical to supporting its capital allocation strategy and shareholder returns.
- Profitability
Financial statements
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Public filings
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- Intuitive Surgical is a leading provider of robotic-assisted surgical systems, with its flagship da Vinci platform enabling minimally invasive procedures across multiple surgical specialties. The company has also expanded into diagnostic procedures with its Ion endoluminal system.
- Adoption of Intuitive's robotic systems is driven by their potential to improve patient outcomes, but is influenced by regulatory approvals, reimbursement policies, and hospital budgets. Increasing competition, particularly in China, poses a risk to the company's market share and pricing power.
- Macroeconomic headwinds, including supply chain constraints, inflation, and interest rate hikes, present operational challenges and could impact customer demand. The company also faces legal risks from product liability lawsuits and commercial litigation.
- Intuitive has continued to drive growth through new product launches, geographic expansion, and increasing procedure volumes. However, managing costs and operating expenses will be critical to maintaining profitability as the company invests in R&D and commercial initiatives.
- The company's strong cash position and cash flow generation provide financial flexibility, but the ultimate impact of legal matters and macroeconomic factors remains uncertain and could pose material risks to Intuitive's business.
Core Business and Operations:
- Intuitive Surgical, Inc. develops, manufactures, and markets the da Vinci® surgical systems and the Ion® endoluminal system
- The da Vinci surgical system enables minimally invasive surgery by using computational, robotic, and imaging technologies
- The Ion endoluminal system is a flexible, robotic-assisted, catheter-based platform used for minimally invasive lung biopsies
- Key customers include hospitals, healthcare providers, and surgeons performing procedures in general, gynecologic, urologic, cardiothoracic, and head/neck surgery
- Major competitors include Asensus Surgical, Inc., Beijing Surgerii Robotics Company Limited, CMR Surgical Ltd., Johnson & Johnson, Medicaroid Corporation, Medtronic plc, and others entering the robotic-assisted surgical systems market
Industry and Market Trends:
- Adoption of robotic-assisted surgery is driven by the potential for greater patient value (improved efficacy vs. invasiveness) compared to alternative treatment options
- Regulatory approvals, reimbursement policies, and hospital budgets/spending are key factors influencing adoption and utilization of robotic surgical systems
- Increasing competition from new entrants and pricing pressures, particularly in China, could impact Intuitive's market share and pricing power
- Supply chain constraints, inflation, interest rate hikes, and macroeconomic uncertainty pose risks to customer demand and the company's operations
Recent Events:
- Launched the next-generation da Vinci 5 surgical system in 2024, featuring enhanced capabilities and user experience
- Received regulatory clearances for the da Vinci SP system in additional global markets, including Europe and Taiwan
- Obtained clearances to expand the indications and capabilities of the Ion endoluminal system in the U.S. and China
- Experienced continued growth in da Vinci and Ion procedure volumes, driven by adoption in the U.S. and international markets
Risk Factors:
- Macroeconomic and geopolitical uncertainty, including supply chain disruptions, inflation, and interest rate hikes
- Regulatory risks related to obtaining and maintaining product approvals, clearances, and certifications
- Potential product liability lawsuits and commercial litigation matters
- Competition from new entrants and pricing pressures, particularly in China
- Reliance on sole- and single-sourced suppliers for critical components
- Exposure to credit risks from leasing arrangements with customers
Legal Matters:
- Facing multiple product liability lawsuits related to alleged injuries from the use of da Vinci surgical systems
- Involved in patent infringement litigation with Ethicon and antitrust litigation with Surgical Instrument Service Company and a class action lawsuit
- Potential financial impact from these legal proceedings is uncertain, but could be material if resolved unfavorably
Management's Discussion and Analysis:
- Total revenue growth driven by increased da Vinci and Ion procedure volumes, as well as higher instruments/accessories and service revenue
- Gross margins remained relatively stable, with product gross margins improving due to operational efficiencies
- Operating expenses increased, primarily from higher R&D and SG&A costs to support growth initiatives
- Strong cash flow generation, with cash and investments growing to over $8 billion
- Utilization of da Vinci systems and placements of new systems continue to be key performance indicators
Earnings calls
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Earnings Report 2024Q4 (2025-01-23)
Key takeaways
- da Vinci 5 Adoption is Key: The successful launch and adoption of the da Vinci 5 platform is crucial for driving revenue growth and maintaining a competitive edge.
- Margin Pressure Expected in 2025: Gross margin is expected to decline in 2025 due to increased depreciation, product mix, and FX headwinds, requiring focus on cost management and product margin improvements.
- International Expansion is Vital: Expanding into international markets, particularly with Ion and SP platforms, is essential for diversifying revenue streams and offsetting potential slowdowns in the US market.
- Competition is Increasing: Intuitive Surgical faces increasing competition, particularly in China, which could lengthen selling cycles and impact market share.
- Digital Innovation is a Differentiator: Continued investment in digital tools and features for the da Vinci platform is critical for enhancing surgeon experience, improving patient outcomes, and driving system upgrades.
Focus of management’s prepared remarks
- 2024 Performance Overview: Intuitive Surgical had a strong year in 2024, marked by robust early adoption of the da Vinci 5 platform and healthy procedure growth across various indications and countries, leading to strong financial results.
- Strategic Priorities: The company focused on four main areas: expanding indications and launching new platforms, increasing adoption for focused procedures, driving quality and gross margin improvements, and increasing productivity.
- Procedure Growth: Overall procedure growth was 17% for the year, with strength in general surgery in the US and regional performance in the UK, Ireland, Japan, and Germany. Distribution markets like Brazil, Spain, and Italy also performed well.
- Platform Adoption: Adoption of Ion and da Vinci SP platforms continued, supported by new global clearances and increased utilization. Ion procedures grew by 78%, and SP procedures grew by 72%.
- System Placements: The company placed 1430 multi-port systems, 271 Ion systems, and 96 SP systems in 2024.
- System Utilization: Multi-port utilization grew 3%, SP utilization grew 12%, and Ion utilization grew 13%.
- Financial Results: Revenue reached $8.4 billion, with 84% being recurring revenue, representing 17% growth over 2023. Net income grew by 29% in 2024 compared to 2023.
- da Vinci 5 Launch: The company placed 362 da Vinci 5 systems in 2024, with over 2,500 surgeons performing over 32,000 procedures on the platform. Upgrades focusing on digital features are planned for da Vinci 5 customers.
- 2025 Priorities: The company's priorities for 2025 include the full launch of da Vinci 5, increased adoption of focused procedures, continued progress in building industrial scale and manufacturing optimization, and excellence in digital tools.
- Acquisition: Intuitive Surgical announced the acquisition of the da Vinci business in Italy, Spain, Portugal, and related territories from ab medica.
- Gross Margin Improvement: Product margins started to improve in 2024 due to increased shipment volume and better factory utilization, as well as leverage in component, shipment, and logistics costs.
Focus of the analyst Q&A
- US System Placements and Utilization:
- The relationship between increased US system placements and utilization rates.
- Whether high system placement growth is a leading indicator of future procedure growth or if a period of digestion is expected.
- Gross Margin Guidance:
- Drivers behind the lower-than-expected gross margin guidance for 2025.
- The path to returning to the company's goal of 70% gross margin.
- da Vinci 5 vs. Xi Mix:
- The expected mix of da Vinci 5 versus Xi system placements going forward.
- The speed and necessity of the upgrade cycle from Xi to da Vinci 5.
- The mix of Xi versus da Vinci 5 placements outside the US as approvals roll in.
- Capital Equipment Environment:
- The health of the capital equipment environment in the US, OUS, and China.
- Factors influencing capital spending decisions in different regions.
- R&D Investment Opportunity:
- The focus of R&D investments over the medium term.
- Potential for expansion into new areas like endoluminal platforms or cardiovascular robotics.
- Operating Expense Growth:
- The breakdown of the 10% to 15% operating expense growth guidance between R&D and SG&A.
- Factors driving the high and low ends of the operating expense growth range.
- Tariffs:
- Potential impact of new tariffs on the business.
- Mitigation strategies for tariffs.
- Digital Features for da Vinci 5:
- How new digital features will enhance da Vinci 5.
- Whether these features will open up new procedures or improve productivity.
- Ion and SP Growth:
- Factors driving the next phase of growth for Ion and SP.
- Timeline for when Ion and SP will no longer be a margin drag.
- Competition and Selling Cycles:
- Whether increased competition is lengthening selling cycles.
- The impact of domestic competition in China.
- Instruments and Accessories:
- The company's current share of the surgical ecosystem in instruments and accessories.
- Opportunities to capture more of the surgical ecosystem.
- Install Base Efficiencies:
- The margin implications of an increasing install base in specific regions.
- Efficiencies in selling into and servicing a denser customer base.
Summary
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Financial Performance
Intuitive Surgical reported a strong full year 2024 with revenue of $8.4 billion, a 17% increase year-over-year. Q4 revenue was $2.41 billion, up 25% year-over-year. Pro forma EPS for Q4 was $2.21, compared to $1.60 in the prior year. Procedure growth was 17% for the full year and 18% for Q4. System placements increased, with 1430 multi-port systems placed in 2024 compared to 1313 in 2023. The company's performance exceeded expectations, driven by revenue growth and strength across the P&L.
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Revenue Drivers
Revenue growth was driven by increased da Vinci system placements, a higher system ASP due to a stronger mix of da Vinci 5 placements, and a higher purchase mix of systems versus leases. Procedure growth in general surgery in the US and in several international markets, including the UK, Ireland, Japan, and Germany, contributed significantly. Ion and SP procedures also showed strong growth. The acquisition of the da Vinci business in Italy, Spain, and Portugal is expected to be slightly accretive to pro forma EPS.
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Profit Margins and Cost Management
Pro forma gross margin improved to 69.1% for the full year 2024 and was 69.5% for Q4, driven by fixed overhead leverage, lower inventory reserves, and improved freight and logistics costs. Pro forma operating margin for 2024 improved to 37%. Operating expenses increased due to headcount, variable compensation, and legal expenses. The company anticipates lower gross profit margins in 2025 due to increased depreciation, a higher mix of lower-margin products (da Vinci 5, Ion, SP), and a stronger US dollar.
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Guidance and Outlook
For 2025, Intuitive anticipates procedure growth between 13% and 16%. Pro forma gross profit margin is expected to be between 67% and 68% of net revenue. Pro forma operating expense growth is projected to be between 10% and 15%. Capital expenditures are expected to range from $650 million to $800 million. The pro forma income tax rate is estimated to be between 22% and 23%. The company noted potential risks including the impact of competition, longer capital selling cycles, and potential tariffs.
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Strategic Initiatives
Key initiatives include the full launch of da Vinci 5, increased adoption of focused procedures by country, continued progress in building industrial scale and manufacturing optimization, and excellence in digital tools. The company is expanding its manufacturing footprint with new facilities for da Vinci 5 and Ion systems, as well as endoscope manufacturing. The acquisition of the da Vinci business in Italy, Spain, and Portugal is aimed at developing closer customer relationships.
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Management Commentary
Management expressed confidence in the company's performance and future prospects, highlighting the strong adoption of da Vinci 5 and healthy procedure growth. They emphasized the importance of innovation, quality, and customer satisfaction. They also acknowledged potential challenges, such as competition and macroeconomic pressures, but remain optimistic about the company's ability to navigate these challenges and deliver long-term value. The CEO stated that the company is focused on improving patient outcomes, care team experiences, and access to care, while lowering the total cost of care.
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Industry and Market Conditions
The company noted that the capital equipment environment in the US has been strong, while some international markets, such as the UK, Germany, and Japan, are facing budget pressures. The Chinese market remains dynamic and challenging due to domestic competition and government policies. The rise in GLP-1 medications has modestly impacted bariatric procedure volumes. The company is closely monitoring potential tariffs and their impact on the business.
Comparative analysis
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Benchmarks (as of 2025-04-14)
Health Care Select Sector SPDR Fund (XLV)
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Performance Comparison:
- Intuitive Surgical, Inc. (ISRG) has generally outperformed the Health Care Select Sector SPDR Fund (XLV) over longer periods (1 Year, 2 Years, and 3 Years). However, in the year-to-date period, ISRG has underperformed XLV. The recent one-week and one-month performance shows ISRG outperforming XLV, while the 3-month performance shows underperformance.
- ISRG's performance relative to XLV has been inconsistent, with periods of outperformance and underperformance depending on the specific time frame.
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Risk and Return Analysis:
- ISRG has provided higher annualized returns compared to XLV over the 1, 2, and 3-year periods. For example, the 2-year annualized return for ISRG is 35.01%, while for XLV it is 3.16%.
- ISRG has exhibited higher annualized volatility compared to XLV. For instance, in Q2 2022, ISRG's volatility ranged from 40.04% to 65.28%, while XLV's ranged from 16.86% to 24.41%.
- ISRG's maximum drawdown was -49.9% on 10/14/2022, significantly larger than XLV's maximum drawdown of -16.06% on 06/17/2022. This indicates a higher risk profile for ISRG.
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Risk-Adjusted Performance:
- ISRG's Sharpe Ratio has generally been higher than XLV's during periods of market stability, indicating better risk-adjusted returns. However, during periods of high volatility, XLV's Sharpe Ratio has sometimes been more favorable. As of April 14, 2025, the Sharpe ratios for ISRG and XLV were 0.89 and 0.16 respectively.
- ISRG's Beta has generally been above 1, indicating that it is more sensitive to market movements than XLV, which has a Beta consistently below 1. As of April 14, 2025, the Beta for ISRG was 1.22 and for XLV was 0.44.
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Overall Assessment:
- ISRG has demonstrated strong performance with higher annualized returns but also exhibits higher volatility and larger drawdowns compared to XLV. This suggests that ISRG may be suitable for investors with a higher risk tolerance seeking higher returns.
- The recent trends indicate a decrease in risk-adjusted returns for both ISRG and XLV, with ISRG remaining more volatile than the market.
Peers Price History(as of 2025-04-14)
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Performance Comparison:
- Intuitive Surgical Inc. (ISRG) has demonstrated periods of both outperformance and underperformance compared to Stryker Corp. (SYK) and Abbott Laboratories (ABT). Over the past year, ISRG has significantly outperformed both SYK and ABT, with a return of 29.88% compared to 5.18% and 19.32%, respectively. However, year-to-date, ISRG is underperforming, with a return of -6.47% compared to SYK's -1.25% and ABT's 13.39%. Over longer periods (2 and 3 years), ISRG has shown substantial outperformance. The recent underperformance suggests potential short-term challenges or market corrections affecting ISRG more than its peers.
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Risk and Return Analysis:
- ISRG has provided higher annualized returns over 2 and 3-year periods but exhibits higher volatility. For instance, ISRG's 3-year annualized return is 21.05%, compared to SYK's 12.12% and ABT's 5.11%. However, ISRG's maximum drawdown of -49.9% on 2022-10-14 is significantly larger than SYK's -31.68% and ABT's -33.88%, indicating a higher risk profile. This suggests that while ISRG offers the potential for higher returns, it also carries a greater risk of significant losses during market downturns.
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Risk-Adjusted Performance:
- ISRG's Sharpe Ratio has generally been higher than those of SYK and ABT, indicating better risk-adjusted returns. However, there have been periods where SYK's Sharpe Ratio was competitive. The recent decrease in Sharpe Ratios for all three companies in Q1 2025 suggests a decline in risk-adjusted performance. ISRG's beta has generally been above 1, indicating higher volatility than the market, while SYK's beta fluctuates around 1 and ABT's beta remains below 1, indicating lower volatility.
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Overall Assessment:
- ISRG presents a profile of higher potential returns coupled with higher risk compared to SYK and ABT. While ISRG has shown strong historical performance over longer periods, its recent underperformance and higher volatility suggest caution. SYK offers a more moderate risk-return profile, while ABT is the most conservative option with lower returns and lower volatility. Investors should consider their risk tolerance and investment horizon when choosing between these companies. ISRG may be suitable for investors seeking higher growth potential and willing to accept greater risk, while SYK and ABT may be more appropriate for those prioritizing stability and lower volatility.
Peers Fundamentals(as of 2024-12-31)
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Market Position and Size:
- Intuitive Surgical (ISRG) has a substantial market capitalization of $175.6 billion, positioning it between Stryker Corp. (SYK) at $134.9 billion and Abbott Laboratories (ABT) at $221.9 billion.
- Despite its strong market cap, ISRG's revenue ($8.4 billion) is significantly lower than SYK ($22.6 billion) and ABT ($42.0 billion), indicating a higher valuation relative to its current sales.
- ISRG's EBITDA ($2.8 billion) and Net Income ($2.3 billion) are also lower than SYK ($6.1 billion and $3.0 billion, respectively) and ABT ($10.1 billion and $13.4 billion, respectively), suggesting a premium valuation based on future growth expectations.
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Profitability and Efficiency:
- ISRG boasts a superior Gross Profit Margin of 67.46%, outperforming SYK (61.52%), ABT (50.9%), and the industry average (18.12%), reflecting strong pricing power and efficient cost management.
- Its EBITDA Margin of 33.66% also exceeds SYK (26.9%), ABT (24.07%), and the industry average (-860.42%), indicating efficient operations.
- ISRG's Net Profit Margin of 27.81% is greater than SYK (13.25%) but less than ABT (31.83%), while still significantly exceeding the industry average (-761.04%).
- ISRG's Return on Average Assets (13.52%), Return on Average Total Equity (15.62%), and Return on Average Invested Capital (15.53%) are generally competitive, although ABT shows higher returns on assets, equity, and invested capital.
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Financial Health and Stability:
- ISRG exhibits exceptional liquidity with a Current Ratio of 4.07 and a Quick Ratio of 3.22, surpassing SYK (1.95 and 1.32, respectively) and ABT (1.67 and 1.23, respectively).
- Its Total Debt to Total Equity Ratio is remarkably low at 0.89, compared to SYK (68.43) and ABT (32.05), indicating a conservative capital structure.
- ISRG's Debt / EBITDA ratio is 0.0, signifying minimal debt burden and strong financial stability.
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Valuation and Market Perception:
- ISRG's valuation metrics are high, with an Enterprise Value To Sales of 22.29, an Enterprise Value To EBITDA of 66.18, and a Price To Earnings ratio of 76.39.
- These figures are significantly greater than SYK (6.58, 24.37, and 45.53, respectively) and ABT (4.89, 20.19, and 16.75, respectively), suggesting that the market has high expectations for ISRG's future growth.
- ISRG's Price to Book Ratio of 10.64 and Price To Sales Ratio of 21.24 further support its premium valuation.
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Cash Flow and Capital Management:
- ISRG's Net Operating Cash Flow is $2.4 billion, which is less than SYK ($4.2 billion) and ABT ($8.6 billion).
- Its Total Capital Expenditure is $1.1 billion, which is greater than SYK ($0.8 billion) but less than ABT ($2.2 billion).
- ISRG's Free Cash Flow is $1.3 billion, which is less than SYK ($3.5 billion) and ABT ($6.4 billion).
- ISRG's Cash Flow / Total Debt is exceptionally high at 2283.77, reflecting its minimal debt and strong cash generation.
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Growth and Future Prospect:
- ISRG's revenue growth consistently outperforms its peers, indicating strong demand for its products and services.
- ISRG's EBITDA growth is also higher than its peers, reflecting efficient cost management and operational leverage.
- However, ISRG's net income growth lags behind its peers, potentially due to higher tax rates or increased non-operating expenses.
- ISRG's free cash flow growth is lower than its peers, possibly due to increased capital expenditures or working capital requirements.
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Potential for Investment:
- ISRG presents a compelling investment opportunity due to its high growth potential, strong profitability, and solid financial health.
- Its superior revenue and EBITDA growth, coupled with a conservative capital structure and minimal debt, make it an attractive investment option.
- However, its high valuation and lower free cash flow growth compared to peers should be carefully considered.
- Overall, ISRG's innovative technology and strong market position in the robotic surgery market make it a promising investment for long-term growth.
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Key Risks and Considerations:
- ISRG's high valuation may make it vulnerable to market corrections if its growth expectations are not met.
- The slower growth in net income and free cash flow compared to revenue and EBITDA could be a potential red flag, indicating issues with profitability or cash conversion.
- Increased competition in the robotic surgery market could erode ISRG's market share and profitability.
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Overall Assessment:
- Intuitive Surgical (ISRG) is a financially strong company with high growth potential and a leading position in the robotic surgery market.
- Its superior profitability margins, low debt, and high valuation metrics indicate a premium market perception.
- However, investors should be aware of its high valuation and potential risks related to competition and slower growth in net income and free cash flow.
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