How Low Can MAKO Surgical Go?

Shares of MAKO Surgical (Nasdaq: MAKO  ) hit a 52-week low yesterday. Let's look at how it got here and see whether dark clouds lie ahead.

How it got here
There's exactly one reason MAKO is where it's at right now: one disappointing earnings release. Just one. The company reported first-quarter figures last week and missed expectations on revenue as RIO systems sales fell short. The company sold only six systems, which caused management to tone down its full-year forecast on how many it expected to sell.

On the bright side, its procedure guidance remained unchanged and MAKO still expects between 11,000 and 13,000 revenue-generating MAKOplasty procedures to be performed this year. Shares had touched an all-time high of $45.15 just six weeks ago, meaning that yesterday's 52-week low of $21.18 represents a gut-wrenching 53% decline.

That puts shares lower than they were a year ago. Yet trailing-12-month sales are up 82% from a year ago, and the commercial installed base of RIO systems has grown by almost 60%. TTM MAKOplasty procedures performed are also up 95%, although, on the flip side, the company's TTM net loss has narrowed by only 4%.

MAKO's actual business -- you know, that thing that investors should care about -- continues to grow. There's no doubt the quarter was a disappointment, but this sell-off is simply overdone.

How it stacks up
Let's see how MAKO stacks up with some of its medical-device rivals and peers.

MAKO Chart

MAKO data by YCharts

Let's add some more fundamental metrics for deeper insight.

Company

P/S (TTM)

TTM Sales Growth

Net Margin (TTM)

ROE (TTM)

MAKO Surgical 10 82% (40.5%) (35.4%)
Intuitive Surgical (Nasdaq: ISRG  ) 11.7 26.6% 28.7% 20.7%
Zimmer Holdings (NYSE: ZMH  ) 2.4 4.8% 17% 13.2%
Hansen Medical (Nasdaq: HNSN  ) 6.7 12% (187%) (118.3%)

Source: Reuters. TTM = trailing 12 months.

While MAKO is working to disrupt traditional larger rivals like Zimmer Holdings and its orthopedic reconstructive devices, Intuitive Surgical and Hansen Medical loosely represent the two extreme outcomes that MAKO is headed toward. Intuitive Surgical is the role model with its da Vinci robots to aspire toward, while Hansen Medical shows how disastrous it can be if adoption fails to take off, as its Sensei systems sales have languished (only two last quarter).

What's next?
This quarter's disappointing RIO sales are sparking similar fears, but I think it's premature to jump to any conclusions. One bad quarter doesn't unravel MAKO's long-term story -- this dip is a buying opportunity.

Use our free Watchlist service to get the latest updates on these medical-device companies.

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 Intuitive Surgical, MAKO Surgical, and Zimmer Holdings. 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.


Read/Post Comments (7) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 15, 2012, at 7:39 PM, BillFromNY wrote:

    And what will happen if the next earnings report does not meet expectations. Look out below.

    And if the next earnings report is OK and not a disappointment, will the price rebound thirty percent in a week. You'll find, if you don't know already, that a busted bubble stock with no earnings takes ten times longer to retrace lost ground than it took to fall.

    You had better be a very confident and knowledgeable long term investor.

  • Report this Comment On May 16, 2012, at 2:06 AM, tokelau wrote:

    Is that really the only thing, this one disappointment? I've heard other analysts expressing their doubts on MAKO some time ago, the same others that the MF often mocks. Maybe it's time MF's writers start to be a bit more modest about their own opinions. Mako has a great business, but their execution coupled with the present economic situation can lose you a lot of money.

  • Report this Comment On May 16, 2012, at 7:17 AM, cmolinel wrote:

    There is no a single reason: MAKO was accused of breaking federal laws.

    In the last few days, several actions against MAKO has been initiated.

    And Motleys doubling? mmm...

    Please update.

  • Report this Comment On May 16, 2012, at 8:55 AM, softwareinvent wrote:

    BillFromNY

    The stock has already gone through a similar roller coaster ride around Nov last year. You have to be braced for volitility in this one, but your argument about popped bubble stocks has already been proven wrong with MAKO.

    cmolinel

    These are ambulance chasing lawyers. Don't know how much weight can be put into that.

  • Report this Comment On May 16, 2012, at 11:00 AM, FRINEDOFFOXY wrote:

    Paul - VA

    The legal actions have been a major contibutor to MACO's tragic fall. I suspect that the legal actions are ambulance chasers looking to obtain settlements rather than pursuing ligit legal recovery. But how does one handicap that? MACO has debt but no earnings. Can they withstand prolonged legal action or heafty settlements? I am keeping a wary eye and have an exit plan at the ready.

  • Report this Comment On May 16, 2012, at 1:58 PM, Risky88 wrote:

    As far as I know lawsuits because a stock dropped are just dumb.

    you know going into it that your taking on risk and your expected to do your own research, no one is forcing you to do anything.

    its called risk for a reason

  • Report this Comment On May 17, 2012, at 12:28 PM, n8larson wrote:

    Based on that chart, it looks like it's only a matter of time before Hansen Medical shareholders will have lost 125%, maybe even 150% of their investment. I hate it when a company comes after money I haven't even invested in it. </snark>

    Bottoming a stock price chart at "-200%"? Really?

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