Intuitive Surgical's Still on Sale

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I had this great plan, but it kind of backfired. After investors put Intuitive Surgical's (Nasdaq: ISRG) shares on sale last quarter, I figured I'd wait for another blue-light special after the company released second-quarter earnings.

Bad idea. The Rule Breakers pick was up 18% yesterday, as the company surpassed analysts' expectations for the 25th straight time. The good news for those who haven't grabbed any shares yet is that the company is still a good value.

This quarter marked more of the same from Intuitive. Revenue rose 56% year over year, and the company sold 85 da Vinci robotic surgery systems, up from 56 in the year-ago quarter. The number of installed systems is probably the most important number for investors to follow, since it'll drive sales of high-margin consumables in future quarters. Management said that its average annual service revenue per installed system is about $135,000.

Gross margin improved slightly from the first quarter, as the company increased its products' average selling price. The margins should improve even more as Intuitive's new manufacturing facility in Mexico gets into full swing. Lower costs relative to revenue pushed operating income up a whopping 74% year over year.

And here's why I think shares are just as good a value today as they were three months ago:

Date	Closing Price	TTM earnings	Price/Earnings
April 18	$288.50	$4.20	68.7
July 23	$331.13	$4.68	70.8

Source: Yahoo! Finance, Capital IQ. TTM = trailing 12 months.

Sure, that P/E hovering around 70 still looks expensive compared to the historical P/Es associated with medical-device companies like Medtronic (NYSE: MDT), Stryker (NYSE: SYK), or Boston Scientific (NYSE: BSX), but can those companies deliver year-over-year growth in the 60% range -- quarter after quarter, year after year? With the growth of hysterectomy procedures taking over for the slowdown of prostatectomies, I can't see Intuitive Surgical's growth decelerating any time soon. Unfortunately, even in a bear market, you've usually got to pay up if you want some serious growth.