Medical devices giant Intuitive Surgical (ISRG -0.50%) has provided market-shattering returns in the past 20 years as it rose to the top of the robotic-assisted surgery (RAS) market -- and that's thanks to its da Vinci surgical system.
While that's great for the company and its shareholders, those who have thus far missed the boat may wonder whether it is still worth investing in this company. After all, Intuitive Surgical may face increased competition in the RAS industry in the coming years.
Can the company still deliver solid returns in the future? Let's see.
The business continues to grow
Let's start with Intuitive Surgical's latest quarterly report. The company's first-quarter financial results were not as bad as one might think. True, Intuitive Surgical's shares sank on the heels of its latest financial results, but there is more to the story. Intuitive's total revenue of $1.49 billion during the first quarter increased by 15% year over year. The company's da Vinci system's installed base grew by 13% year over year to 6,920.
Also, worldwide, da Vinci procedures grew by 19% during the quarter. The number of procedures performed with the company's da Vinci system is an important metric. More procedures lead to more instruments and accessories sold, which is currently Intuitive Surgical's most important source of revenue. This metric dropped during the coronavirus pandemic, and as the outbreak is gradually fading, it is rebounding.
On the bottom line, Intuitive Surgical's adjusted net income came in at $1.13 per share, lower than the $1.17 reported during the year-ago period.
Image source: Getty Images.
Management said that higher expenses and the "challenging global environment" are likely to blame for the company's net income decrease. Still, Intuitive's results were better than analysts expected. Why did the healthcare giant's shares fall? It's because the company warned of potential, continued impact of the pandemic on the pace of surgical procedures and, thus, its financial results.
But is that a good enough reason to jump ship?
Why the future is still bright
Intuitive Surgical may continue to face headwinds related to the pandemic. And as already mentioned, other companies -- including medical devices juggernaut Medtronic -- are looking to take some market share away from Intuitive Surgical in the RAS industry. While these issues aren't insignificant, they don't warrant staying away from Intuitive Surgical. First, the pandemic is unlikely to last forever. We have already made tremendous progress in the fight against COVID-19.
Plenty of vaccines and therapies are now available for the illness, and there could be even more in the coming months. Second, although competition is coming for Intuitive Surgical, the company has built such a strong competitive advantage that it will remain one of the most prominent players in this field for many years to come. Intuitive Surgical's competitive edge stems from several sources, including high barriers to entry into the market.
Developing RAS devices is capital-intensive and requires companies to meet legal and regulatory requirements. Further, Intuitive Surgical already has a solid customer base. Given that the da Vinci system costs between $0.5 million and $2.5 million -- not including the time it takes to train medical workers on the machine -- jumping ship to a rival device is out of the question for many healthcare facilities. Intuitive Surgical also benefits from thousands of patents that protect its inventions from competitors.
All these factors bode well for the company's future. And given that the industry is projected to expand at a compound annual rate of 17.6% through 2028, Intuitive looks to be in an excellent position to grow its revenue and profits in the coming years. In short, despite the near-term troubles it is facing, it isn't too late to purchase shares of this top healthcare stock.
