Nearly every industry has one company that stands out as a pioneer and a leader. In robotic surgical systems, that company is definitely Intuitive Surgical (NASDAQ:ISRG). Since introducing the da Vinci robotic surgical system in 1999, Intuitive has set the standard in robot-assisted surgery.

Tremendous success can lead to either momentum or inertia. Which path is more likely for Intuitive Surgical in the future? Here's where I think the company will be in 10 years.

Surgeons performing a procedure using the da Vinci robotic surgical system

Image source: Intuitive Surgical.

The last 10 years

Mark Twain is often credited with saying, "History doesn't repeat itself, but it does rhyme." Whether or not the famous writer actually made the statement, it's a pretty good observation. I think it's important to look back at what Intuitive Surgical has accomplished over the past 10 years to get a feel for what the next 10 years might hold.

Let's start with Intuitive's business. In 2010, the company's revenue totaled $1.4 billion with earnings of nearly $382 million. Last year, Intuitive Surgical generated revenue of close to $4.5 billion and made a profit of $1.4 billion. That's an impressive growth story that Intuitive achieved primarily in two ways.

First, the company demonstrated that robotic surgery provided value to its hospital customers. Sure, there were some bumps in the road as skeptics challenged the value proposition of the da Vinci system. But the numbers show that Intuitive largely overcame the skepticism.

Second, Intuitive Surgical innovated in a major way, expanding the types of procedures that could be performed with robotic assistance. Its procedure volume in 2010 totaled 278,000, with 110,000 hysterectomies and 98,000 prostatectomies. Fast-forward to 2019, and Intuitive's da Vinci system was used in 1,229,000 procedures. A little over half of those procedures were hysterectomies and prostatectomies. The rest were general surgical and other surgeries.

This procedure volume growth has driven Intuitive's recurring revenue much higher. Ten years ago, the company made 53% of its total revenue from recurring sources. Today, that percentage stands at 72%.

It's not surprising that the healthcare stock has been a huge winner. Intuitive Surgical's share price has nearly quadrupled over the past 10 years.

Trends shaping Intuitive Surgical's future

I think both of these trends that helped Intuitive Surgical achieve tremendous success over the past 10 years will be key to the company's future as well. Intuitive's value proposition and long track record should help it fend off rivals that are aiming to compete against da Vinci. 

Some might think that the efforts by big companies like Johnson & Johnson and Medtronic and small players such as TransEnterix (NYSEMKT:TRXC) to battle da Vinci in the robotic surgical systems market will hurt Intuitive Surgical. My view, though, is that the presence of additional companies is more likely to help Intuitive by expanding the overall market.

Intuitive continues to innovate today as much and arguably even more than it has in the past. The company's new products should push the boundaries on the types of procedures that can be performed using robotic assistance. This will drive procedure volume growth, which, in turn, will push Intuitive's recurring revenue even higher in the coming years.

One other key way ththe company's recurring revenue is growing is that more customers are opting to lease systems rather than purchase them. Although this shift could weigh on Intuitive's revenue in the short term, it will be a big plus for the company over the long term.

There's also a greater dynamic at work that will shape Intuitive Surgical's future in a significant way. The numbers of senior citizens in the U.S. and in other major countries across the world are rising steadily. This demographic trend will increase the demand for the types of procedures that are ideal for robotic surgery.

Three predictions

So where will Intuitive Surgical be in 10 years? I have three predictions:

  1. The company will have a smaller market share in robotic surgical systems but in a much larger market than exists today.
  2. Intuitive Surgical's market cap will be in the ballpark of $200 billion, up from around $65 billion today.
  3. The company will be a key player in adjacent markets outside of robotic surgical systems. 

My first prediction is based on my view that J&J, Medtronic, and others will make some inroads with their new robotic surgical systems. As I mentioned earlier, though, I think the overall market will grow, benefiting Intuitive Surgical along the way.

The second prediction assumes that Intuitive Surgical will be able to grow revenue and earnings by a compound annual growth rate of around 12%. That's a little higher than Wall Street analysts' consensus earnings growth projections over the next five years, but I think Intuitive will pick up greater momentum in the second half of the next decade thanks to aging trends.

As for my third prediction, Intuitive Surgical is already expanding into hospital informatics with its acquisition of Orpheus Medical announced earlier this month. The company has a huge cash stockpile. I think it will put that cash to work by buying more small companies that enable it to widen its ecosystem beyond robotic surgery.

There will likely be plenty of changes over the next 10 years that no one can predict. However, I suspect that the Intuitive Surgical of 2030 will be similar to the company today in one key aspect: It will still stand out as a pioneer and a leader in robotic surgery.

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.