How High Can Intuitive Surgical Fly?

Shares of Intuitive Surgical (Nasdaq: ISRG  ) hit a 52-week (and all-time) high recently. Let's look at how it got here and see whether clear skies are ahead.

How it got here
The maker of da Vinci surgical machines has risen to the top and delivered market-decimating returns to early shareholders precisely because it's one of the best examples of transformative disruption. It has a nearly perfect implementation of the classic razor-and-blade model and keeps boggling Street analysts with stellar results.

Back in January, the company reported fourth-quarter 2011 results, growing its top line by 28%. Adoption of da Vinci systems continues to march higher, which leads to years of recurring revenue from instruments, accessories, and services.

It's proved to be one of the greatest businesses of our time -- one that Fool co-founder David Gardner recommended in 2005, and even re-recommended earlier this year. Fellow Fool Brian Orelli thinks its long-term growth prospects are so good that you can retire with it.

In short, Intuitive Surgical shows no signs of slowing down anytime soon.

How it stacks up
Let's see how Intuitive Surgical stacks up with some of its peers.

ISRG Chart

ISRG data by YCharts

Let's toss in some fundamental metrics for additional insight.

Company

P/S (TTM)

EPS Growth (5-Year Rate)

Net Margin (TTM)

ROE (TTM)

Intuitive Surgical 12.3 45.5% 28.2% 21.1%
Accuray (Nasdaq: ARAY  ) 1.6 NM (19.8%) (31.4%)
Medtronic (NYSE: MDT  ) 2.4 6.5% 20.4% 20.3%
MAKO Surgical (Nasdaq: MAKO  ) 21.3 NM (42.8%) (32.5%)
Hansen Medical (Nasdaq: HNSN  ) 8.0 NM (75.5%) (52%)

Source: Reuters. TTM = trailing 12 months. NM = not meaningful.

Intuitive Surgical looks like it's worth its lofty valuation, thanks to its strong business and reliable profitability, not to mention soaring growth. MAKO has had an even more impressive rally over the past several years, which is largely because investors (including me) see a younger Intuitive Surgical in MAKO.

Intuitive Surgical co-founder Dr. Fred Moll sits on both the boards of MAKO and Hansen Medical. Hansen's business has meandered while MAKO's has begun to take off, but it will be a while before we know whether MAKO can be like its intuitive role model.

What's next
Intuitive Surgical shares sit at all-time highs. On top of that, the company is set to report first-quarter earnings Tuesday, which could let it push higher or pull back. Either way, I think this company is a long-term winner, so I'm also going to give it an outperform CAPScall to back up all my bullishness.

Interested in more info on Intuitive Surgical before its earnings release? Add it to your Watchlist. And for more earnings-season insight, check out our brand-new free report: "5 Stocks Investors Need to Watch This Earnings Season." It details what to look for from Apple and four other must-watch companies as they disclose their recent performance results. Get access right now.

Fool contributor Evan Niu owns shares of MAKO Surgical, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Medtronic and MAKO Surgical. Motley Fool newsletter services have recommended buying shares of MAKO Surgical and Intuitive Surgical. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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