The list of companies with a market capitalization above $1 trillion is small, and highly exclusive. It includes some of the world's most successful and recognizable businesses, such as Microsoft and Apple. In 20 years, this clique will almost certainly get larger. Companies that join this elite group in the next two decades will need to provide market-beating returns along the way.

Let's look at one company which could pull that off: Intuitive Surgical (ISRG -0.14%). The company's market capitalization is just $89 billion, implying a compound annual growth rate (CAGR) of just under 13% through the next couple of decades. Let's see how it can get there.

Innovation pays off

Intuitive Surgical is the leader in the robotic-assisted surgery (RAS) market. The company's robotic device is called the da Vinci system. This machine has a claim to fame: In 2000, it became the first of its kind to earn clearance from the U.S. Food and Drug Administration. The da Vinci system is helping physicians perform minimally invasive procedures. Why is that important?

Open surgeries require physicians to have a full view of the patient's relevant body parts. That's where the name comes from, since doctors have to "open" the patient up. Doing so requires cutting up a lot of skin, which leads to bleeding, scarring, and a long time to recover, depending on the procedure.

Minimally invasive surgeries are different. There is no need to have full access to the patient's organs. Physicians make small incisions and use tiny, flexible instruments they can manipulate with incredible accuracy to get the job done. The result is less cutting of the patient's tissue, less bleeding, less scarring, faster recoveries, and less time spent in the hospital. Obviously, that's great for patients, but physicians and the entire healthcare industry can also benefit.

Decreasing the time a patient has to spend in the hospital by even a few days can help increase the number of admitted people and address more patients' needs. Intuitive Surgical has been riding the coattails of this approach for over 20 years now, thanks to its crown jewel -- and there is much more room for growth ahead. 

Massive long-term tailwinds

Intuitive Surgical is arguably still in the early innings of its growth opportunities. Let's consider two reasons why. First, the world's population is aging. That is largely a side effect of medical innovation in the past century. According to the World Health Organization, people aged 60 and older will make up 22% of the world's population by 2050, compared to just 12% in 2015.

People need more medical attention in their golden years, including surgeries of various types. So this demographic change will increase the need for precisely the kinds of services Intuitive Surgical helps facilitate, thanks to its da Vinci system.

Furthermore, minimally invasive procedures have a long way to go before catching up to their open counterparts. As of 2021, they made up just 3% of total surgeries despite their advantages. That percentage should grow in the coming couple of decades, which will benefit Intuitive Surgical. 

A solid competitive advantage

Intuitive Surgical isn't the only company in this space. Two of its most important competitors will likely be Medtronic with its Hugo system and Johnson & Johnson's Ottava. Neither of these poses a serious threat to Intuitive Surgical right now, given the company's dominance in the RAS market. But Medtronic is a well-run medical device specialist that will grow in prominence in this field. One could say more or less the same about J&J.

But even with these competitors, Intuitive Surgical can deliver excellent returns for a long time thanks to its moat. Consider the company's high switching costs. It takes between $0.5 million and $2.5 million to buy a da Vinci system. Then it takes time to train physicians to use it. Jumping ship will be out of the question for most healthcare facilities except in extreme circumstances.

The industry is also capital-intensive and highly regulated, all serving as barriers to entry. Building a surgical robot is hard enough. Testing it and proving it functions to regulators' standards is also tricky. It's no wonder most of Intuitive Surgical's challengers are healthcare giants with deep pockets and long-standing industry know-how. The company will remain near the top of this space for a while, thanks to its competitive advantage. 

A bright future ahead 

The pandemic led to fewer procedures, thereby disrupting Intuitive Surgical's business. It has also had trouble placing its da Vinci systems due to supply chain concerns. Still, the company ended 2022 with 7,544 systems in place, an increase of 12% year over year. The company's revenue of $6.2 billion increased by 9% compared to the previous fiscal year. Intuitive Surgical's net earnings per share of $3.65 dropped by about $1 compared to 2021, largely due to macroeconomic factors.

Intuitive Surgical should rebound as procedure volume increases, allowing it to sell more of its instruments and accessories that make up the bulk of its top line. This dynamic, together with its moat, will also allow it to deliver market-beating returns over the next couple of decades. In my view, the company can register a CAGR of 13% in the next two decades, becoming a trillion-dollar company at the end of this period.