Intuitive Surgical (ISRG -1.93%) continues to dominate the robotic-surgery market, and demand keeps increasing for these machines that allow doctors to conduct minimally invasive surgeries. In the first quarter, the company once again saw a rise in sales and profits. Yet when Intuitive reported these results on April 21, the market reacted with some disappointment.

That sell-off shouldn't worry investors. I believe now is the right time to buy shares of Intuitive Surgical.

A robotic surgery system in an operating room.

Image source: Getty Images.

Intuitive continues on the path to success 

Even though the most intensive phase of the pandemic appears to be behind us in the U.S., with social distancing and masking rules lifted in most places, demand for elective medical procedures has not yet returned to pre-pandemic levels.

Despite these challenges, Intuitive reported another stellar quarter. Total revenue came in at $1.5 billion, up from $1.29 billion in the prior-year period. This growth was fueled by a 19% jump in the number of procedures performed worldwide, using da Vinci systems. The company also placed 311 da Vinci systems in the quarter compared to 298 in Q1 2021.

Its da Vinci systems continue to provide surgeons with 3D high-definition views of the operating field and use of tiny, machine-manipulated instruments for smooth precision. On top of that, use of these minimally invasive procedures means shorter recovery times for patients.

Intuitive doesn't just earn revenue from the initial sales of its machines; a large fraction of its top line comes from the sales of the disposable instruments and accessories used up during each da Vinci-facilitated surgery. That figure jumped 15% to $810 million from the prior-year quarter.

Despite this solid revenue growth, net income fell to $413 million, or $1.13 per share, vs. $427 million or $1.17 per share a year earlier. "Customer demand for our products was healthy in the first quarter despite a challenging global environment," said CEO Gary Guthart.

Not only did Intuitive's revenue rise, but so did its capital efficiency. It ended the quarter with $8.4 billion in cash, cash equivalents, and investments on its balance sheet.

Future looks bright

Intuitive's stock slumped 14% on April 22 after its Q1 results even though its performance was impressive, particularly given current economic conditions. The market's negative reaction was mostly due to management's forecast for the rest of the year. On the earnings call, the company noted that ongoing challenges of the COVID-19 crisis have led many patients and doctors to continue deferring elective procedures.

Intuitive revised its procedure growth forecast to a range of 12% to 16% for 2022, up from its previous guidance range of 11% to 15%, but acknowledged that its guidance "continues to reflect the uncertainty associated with the course of the pandemic." According to management, its year-over-year procedure growth rate will likely be lower in Q2 2022 because its Q2 2021 results reflected a rise in demand for elective procedures when COVID-19 rates started subsiding. 

I believe this is not much of a concern right now. When the pandemic subsides, patients will come back and get their postponed elective procedures done, which should drive revenue and profit growth for Intuitive for many years to come. And given the aging populations of the U.S. and Europe (by far its largest markets), demand for minimally invasive surgeries should continue to rise. 

Intuitive has more room to grow 

Besides manufacturing these state-of-the-art machines, Intuitive also provides training to surgeons on how to use them. Though peers like Stryker, Medtronic, and Johnson & Johnson are also entering this robotic surgery segment, Intuitive has a wide moat here. Once a hospital spends a large sum on a da Vinci system, and then spends still more money and time getting surgeons trained to use it, that hospital will be unlikely to switch to a new product, even if it's cheaper.

Given how high the switching costs are, it's safe to bet that Intuitive's revenue growth won't be hindered much by the arrival of competing systems on the market. Wall Street also has hopes for Intuitive's stock. Analysts, on average, see it as having an upside of 15% in the next 12 months. Considering that Intuitive is trading more than 20% below its 52-week high of $369.69 per share, it looks like the right time to buy this healthcare stock.

Intuitive has the potential to outperform the market in the longer run.