For more than two decades, Intuitive Surgical (ISRG -0.50%) has dominated the robotic surgery business. In this video clip from "The Rank" on Motley Fool Live, recorded on March 7, Fool.com contributors Jason Hall and Tyler Crowe discuss the Da Vinci surgical system, the company's flagship product, and how it has fueled incredible success.
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Jason Hall: Intuitive Surgical, this is the dominant company that comes to mind is the razor and blade model nowadays. They make the Da Vinci surgical robots and provide the consumables for that robot. It has become the dominant platform for robotic surgery and is constantly expanding the different number of surgical applications that it can be used for. Expanding globally their presence.
I think the best way to describe it as at this point, you have an entire generation of surgeons that are trained on the Da Vinci. This is how they perform surgery. You combine that with the IP wall that it has, the patent wall that it has and it is just an incredible business.
It's also backed up with a lot of data about the outcomes of the procedures that they do. Faster recovery times, better outcomes, lower risks that have made it just a really great company. Then you look at those returns. Again, this is using those same three metrics we looked at with Winmark (WINA -1.65%). This is since the company went public. The cash flow, earnings per share, and operating cash flow have essentially climbed together for multiple decades. It is just a wonderful cash cow business.
By the way, they don't lose money on that razor and blade model on the razor. They make a ton of money selling the Da Vinci robots. They just also happen to make a ton of money selling the consumables that are used with each procedure. Tyler?
Tyler Crowe: [laughs] I really don't have any questions.
Hall: This one was so far outside of your circle of confidence in terms of a healthcare stock.
Crowe: I know it sounds really silly. It's been in the Motley Fool universe for a really, really long time.
Hall: Long time.
Crowe: I don't know, I just never got to it.
Hall: It's not too late. It's a little pricey right now. That's actually one of the reasons that I rated as low as I did. The valuation is quite high.
