Each week, Motley Fool editors cull a top stock idea from the pitches made on CAPS, The Motley Fool's 170,000-member free investing community. Want your idea considered for this series? Make a compelling pitch on CAPS with a minimum length of 400 words. Want to follow our weekly picks? Subscribe to our RSS feed or follow us on Twitter.
|Company||Mako Surgical (Nasdaq: MAKO )|
|Stock Price at Underperform Recommendation:||$31.57|
|Headquarters||Fort Lauderdale, Fla.|
|Industry||Health Care Equipment|
|Market Cap||$1.27 Billion|
|Industry Peers||Opko Health (AMEX: OPK )
Hansen Medical (Nasdaq: HNSN )
Medtronic (NYSE: MDT )
Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.
Mako Surgical has had an excellent run the last six months and is a 3 bagger for faithful holding longs. Overall they are gaining analyst and institutional support. Some of the rise is the comparison to Intuitive Surgical [ (Nasdaq: ISRG ) ] which is up 32X since 2003. I'm not sure if the comparison is close and I do understand the value of finding an entry position in a promising equity, but I expect a correction to occur soon.
Mako Surgical continues to lose money and while I agree that when Mako Surgical does book a profit that it will be a nice catalyst for the stock, at this point however the P/B of 11.3, P/S of 26 and the negative cash flow do not support the 3X rise. A 26% short position could cause another spike upward should Mako Surgical issue any "surprises," but overall I believe this run is done. It's hard to argue at times with momentum stocks as the top is very difficult to call, but I think the risk/reward is back down on this one. (Estimating sub $22).