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Intuitive Surgical Generates More Market Optimism

By Motley Fool Staff – Apr 23, 2018 at 5:55PM

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Sales of its da Vinci robotic surgical system rose at double-digit rates once again.

In this segment from MarketFoolery, host Chris Hill and Motley Fool Asset Management's Bill Barker consider the case for healthcare innovator Intuitive Surgical (ISRG 4.23%), which has been on a tear for the past few years. Its pricey robots are growing ever more common and popular with hospitals and doctors, and based on the reaction of the market, investors must expect its current sales growth pace to continue.

A full transcript follows the video.

Bill Barker is an employee of Motley Fool Asset Management, a separate, sister company of The Motley Fool, LLC. The views of Bill Barker and Motley Fool Asset Management are not the views of The Motley Fool, LLC and should not be taken as such.

This video was recorded on April 18, 2018.

Chris Hill: Intuitive Surgical's first quarter ... just, lather, rinse, repeat, just another strong quarter from Intuitive Surgical. Increased sales of the da Vinci robotic Surgical System, and the stock on the rise once again.

Bill Barker: Yes. And it's having a very good day. It's also worth remembering that this is not something that has gone straight up as much as you might think. That is, it took a pause for about four years, from 2012 to 2016, kind of traded sideways for a lot of that time as it digested some of the growth that it had made, but also ran into some problems. It's gone beyond those at the moment. And now, with quarters like this, 25% top line growth, I think 15-18%, depending on how you're looking at it, procedure growth, it's reacting today as if that's the kind of growth that you can look forward to compounding over some period of time over the future. Trading at about 75-80X earnings.

So, the market is obviously delighted with the story it sees today, and it's just worth remembering that numbers like that, even for a company which is in a space like robotic surgery that's as exciting as it continues to be, that kind of growth is not guaranteed. The market is looking at it as if it's guaranteed. I would say, consider the alternative, which was experienced by this company no more than two, three years ago.

Bill Barker has no position in any of the stocks mentioned. Chris Hill has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Intuitive Surgical. The Motley Fool has a disclosure policy.

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