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Intuitive Surgical on Sale

Investors who don't currently own Intuitive Surgical (Nasdaq: ISRG  ) -- myself included -- were probably hoping the company would miss earnings yesterday. Heck, you'd probably find a few shareholders rooting for a miss, just so they could pick up a few more shares at a discount.

No such luck. The company beat analysts' earnings expectations by about 14%. However, the company doesn't seem to have beat investors' expectations. I guess Intuitive Surgical's investors have come to expect more; their disappointment battered down the stock by more than 16% today. Earnings surprises just aren't good enough anymore.

The number of systems installed is the most important number for investors to monitor, because it'll drive future sales of high-margin instruments and accessories. Such sales rose 54% year over year this quarter. The company sold 74 da Vinci Surgical Systems in the first quarter, up from 44 during the year-ago quarter. That figure's still down slightly from the 78 it sold in the previous quarter, but that's no surprise. Hospitals' budgeting systems tend to push big purchases into the fourth quarter. All in all, Intuitive enjoyed a pretty good quarter indeed.

After the solid earnings and the price drop today, the Rule Breakers pick is trading around 79 times its trailing-12-month earnings. That's still much higher than other medical device companies like Medtronic (NYSE: MDT  ) , Stryker (NYSE: SYK  ) , or St. Jude Medical (NYSE: STJ  ) , but those companies just don't have Intuitive Surgical's growth potential. You'll likely find the media opining that Intuitive Surgical is still overpriced at this level -- the sixth sign of a Rule Breaker, I should note. For Fools looking to jump on the growth bandwagon, though, there might not be a cheaper entry point than this.

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