Can MAKO Surgical Recover by Year's End?

With half of 2012 in the record books, it's important to take a look at whether the stocks that interest you can live up to their full potential. By making sure you know about a company's future plans and possible challenges, you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at MAKO Surgical (Nasdaq: MAKO  ) . As we saw in our look at MAKO Surgical earlier this month, the medical equipment maker has promising technology in the form of its RIO surgical system for hip and knee surgeries. But sales have been slower than expected, and impatient investors crushed the stock. Can the company ever bounce back? Let's take a quick look at MAKO Surgical's prospects for the rest of the year and beyond.

Stats on MAKO Surgical

Average Stock Price Target $21.83
2012 EPS Estimate ($0.77)
2013 EPS Estimate ($0.42)
Fiscal 2012 Sales Growth Estimate 31%
Fiscal 2013 Sales Growth Estimate 40.3%
CAPS Rating (out of 5) *****

Source: Yahoo! Finance.

Will MAKO Surgical ever heal?
MAKO is a classic example of a high-growth stock that got ahead of itself. When you ignore the stock price and just look at the company, it's hard to argue that MAKO doesn't have a lot going for it. With demographics on its side and with Intuitive Surgical (Nasdaq: ISRG  ) already having done a lot of the heavy lifting in getting medical professionals prepared for robotic systems, MAKO has the opportunity for explosive growth.

But the company has demonstrated twice now that it can't give investors the growth trajectory they'd like to see. Whether it's because hospitals are reluctant to turn away from traditional implants from veterans Zimmer Holdings and Stryker (NYSE: SYK  ) or simply a matter of short-term economics, MAKO didn't deliver sales in sufficient numbers to justify its formerly high share price.

The main problem MAKO has right now is that it has completely lost credibility with its sales estimates. Having cut guidance on unit sales two quarters in a row, MAKO will have to prove its new numbers are more accurate than the old ones before investors start feeling confident about the company's prospects. With former sales VP Stephen Nunes out, the company may be able to convince big hospital corporations HCA (NYSE: HCA  ) and Tenet Healthcare (NYSE: THC  ) that buying RIO systems makes long-run sense.

As analysts' target stock price suggests, it's not realistic to expect MAKO's shares to triple and regain all of their losses. But given enough time, the company could still prove to investors that its innovative technology can make money. The question is whether the company will have enough time to get the job done.

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Click here to add MAKO Surgical to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool owns shares of Intuitive Surgical, MAKO Surgical, and Zimmer Holdings. Motley Fool newsletter services have recommended buying shares of Stryker, Intuitive Surgical, and MAKO Surgical. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.

Read/Post Comments (4) | Recommend This Article (6)

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 July 20, 2012, at 11:49 AM, captainccs wrote:

    >>>MAKO didn't deliver sales in sufficient numbers to justify its formerly high share price.

    MAKO didn't decide the stock price, investors did. MAKO didn't get ahead of itself, investors did -- just look at the previous Price to Sales (P/S) ratio. It was nose bleeding absurd.

  • Report this Comment On July 20, 2012, at 12:10 PM, villainx wrote:

    >>>>>MAKO didn't get ahead of itself

    I like MAKO, but they did revise down the projections.

  • Report this Comment On July 20, 2012, at 12:55 PM, kel4003 wrote:

    Valid point, captainccs. I cant say im qualified to predict mako's future, but i feel that the solution to their sales woes are obvious.

    Lets assume that their product is as good as popular consensus would have us believe. If thats the case, then its really a matter of increasing public awareness (not just awareness among the investing and medical communities).

    I understand that medical products are traditionally expensive. But if its a great product and not selling then the price is too high.

    Innovation sells, but truly game changing products need to be available to the masses, cheaper, and better, as well as inimitable.

    Mako's products are probably better. and possibly inimitable. But the initial cost is high. And hardly anybody even knows about it yet.

    My feeling is that Mako should step up their advertising and promotion. Maybe getting some aging celebrities or athletes to endorse them on tv

    The upcoming boomer market might not be as cherry as we'd like to think, given how few people have saved for retirement. Mako needs to drop the price to get enough systems out there to acheive a foundation for thier razors and blades model.

    Rich folks make great customers, but average folks have knees, too, and a lot more of them

    After seeing the salaries of some of the directors of Mako, I think I understand why they may not naturally relate to this.

    Maybe they can adapt.

  • Report this Comment On July 21, 2012, at 5:20 PM, Honeybe2 wrote:

    I want to be respectful and foolish, but I read your article and it seems to me that you didn't even begin to answer the question you posed in the title. I'm still totally in; the dark about what to do with this stock

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