Image source: Getty Images.

The past 12 months have been tough on healthcare stocks across the sector, but robotic surgery upstart TransEnterix (NYSEMKT:ASXC) has taken a more severe beating than most. The stock rose sharply in anticipation of FDA clearance for its SurgiBot system, then crashed when the regulator deemed it "not substantially equivalent" to existing devices in April.

The robotic surgery market is expected to grow at a dizzying pace from about $2 billion in 2015 to between $10 billion and $20 billion (depending on who you ask) over the next five years. Some investors are wondering if beaten-down TransEnterix stock might be a bargain compared to Medtronic (NYSE:MDT), the world's largest medical-device company. Medtronic's stock bucked the healthcare sector's negative trend, packing on gains of about 14% over the past year.

Let's compare the two to see which is the better buy.

Strong points

With the acquisition of Covidien last January, Medtronic expanded its lineup to include patient monitors and gastrointestinal and respiratory products, to name just a few. In addition to providing an Irish domicile, and thus a lower tax rate, Covidien helped Medtronic take a huge step toward becoming a one-stop shopping center for healthcare providers around the globe.

Medtronic's purchasing hasn't been limited to big players like Covidien, either. Last year it also picked up eight much smaller companies in order to get its hands on promising technology. For example, the $472 million acquisition of privately held Twelve, Inc. strengthened Medtronic's cardiovascular segment with a catheter-held heart valve replacement that could help its cardio segment add to the $10.2 billion in sales recorded during the fiscal year ended April.

Image source: TransEnterix.

Last September, TransEnterix completed an acquisition of a second robotic surgery system, ALF-X, for about 15.5 million shares of its own stock, $25 million up front, and 27.5 million euro contingent on reaching regulatory and commercial milestones. It's a good thing, too, because without ALF-X, the company would have nothing to sell at present.

Weak points

Unfortunately, we can't predict ALF-X's potential based on sales achieved since earning European marketing approval (a CE mark) in 2011, because there haven't been any. TransEnterix has its hopes pinned to a robotic surgery system that hadn't made a sale after years on the European market.

Several years ago TransEnterix was generating some revenue from a non-robotic, manual, minimally invasive surgical system. It ceased selling the Spider line of products at the end of 2014 to focus on the SurgiBot system, which failed to earn a green light from the FDA in April and has since been placed on the back burner.

At present, Medtronic's biggest drawback is the $68.4 billion in goodwill and other intangible assets on its balance sheet. These assets shouldn't lose their value, but they often do. Amortization of intangibles reduced operating profits by $1.93 billion in fiscal 2016, to $5.29 billion. Hopefully, they won't dig further into the company's bottom line in the years ahead.

Reasons to be excited

Robotic surgery is an exciting field that's growing exponentially. There's a chance, albeit a slim one, that TransEnterix could find success with the ALF-X system that its previous owner couldn't. Given TransEnterix's market cap of just $153 million at recent prices, any sign that the ALF-X can gain traction in the EU, or the U.S. if granted clearance by the FDA, would probably send the stock soaring.

During fiscal 2016, Medtronic generated free cash flow of about $4.17 billion, but over the next five years the company anticipates $40 billion. That's a huge improvement, and best of all, Medtronic intends to return at least half to shareholders in the form of share repurchases and a dividend that it has increased for 39 consecutive years.

At recent prices, Medtronic's payout offers a yield of about 2%. That's not exactly eye-popping, but when you consider that the company has increased its dividend at an annualized rate of 14.3% over the past decade, this stock could provide a great deal of reliable income over the years.

Reasons to worry

Clearly the biggest concern for TransEnterix is the continued lack of ALF-X system sales. The company finished April with about $75 million in cash and equivalents, but operations burned through almost $15 million in the first quarter alone.

If ALF-X is to succeed, it had better show some signs of promise fast. The 15.5 million shares TransEntrix used to purchase ALF-X wasn't the only stock that it issued recently. Since the beginning of 2015, the company has increased its share count about 81% to 114.8 million shares. This means investors who held on for a couple of years are entitled to a much smaller slice of potential profits. With TransEnterix's stock languishing at about $1.35, trying to fill its coffers at the equity tap again would lead to severe dilution.

Image source: Medtronic.

There's a lot less to worry about with Medtronic. Medical device competition is fierce, but Medtronic's scale (and lower tax bracket) allows it to remain profitable at prices smaller competitors can't match. Lower reimbursement levels from potentially tight-fisted government payers might make reaching its ambitious cash flow targets difficult. Such austerity, however, would probably benefit the goliath in the long run by knocking out smaller competitors.

At about 18 times forward earnings estimates, Medtronic stock isn't cheap, but the risks are minimal. Toss in a dividend that hasn't stumbled in 39 years, and it's clearly the better buy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.