The stock market and risk are inextricably linked. Having a portfolio of solid stocks with long-term potential is a smart way to mitigate risk during market volatility. Investing in healthcare can help you weather the market's ups and downs. Healthcare is a defensive sector, which means that regardless of the economic situation, demand for healthcare products continues to rise. 

Intuitive Surgical (ISRG 0.50%), the market leader in robotic surgery, is one such company. Over its 28 years in business, Intuitive has accomplished great success and still has a long way to go in the medical device industry. It has managed to rapidly increase its revenue and net profits over the last five years, as shown in the chart below.

Let's look deeper to see why this growth stock has the potential to outperform the market in the long run.

ISRG Revenue (Annual) Chart.

ISRG Revenue (Annual) data by YCharts.

Its business grows as the population ages

With the introduction of its cutting-edge da Vinci Surgical System, Intuitive has established a strong presence in the market for minimally invasive surgery.

Demand for this kind of surgery is increasing as the population ages. Intuitive saw a setback amid the pandemic as these procedures are elective. However, demand for these procedures is returning to normal, which is boosting Intuitive's business again.

Patients often prefer robotic surgery because of the shorter recovery times. The da Vinci system allows surgeons to see the operating field in 3D for a more precise procedure using tiny, machine-manipulated instruments.

Using these systems, Intuitive has increased the number of da Vinci procedures performed globally by a whopping 82% between 2017 and 2021. Globally, Intuitive has installed close to 7,779 systems as of this past March. This is a drastic growth from 4,409 systems installed at the end of 2017. 

It has a stellar business model

Intuitive just doesn't sell these systems but also leases them. In the first quarter alone, it placed 312 systems and leased 131. The number of installed systems is expected to grow further, according to management.

Another intriguing aspect of Intuitive's business model is that it is not the sale of these machines that drives its revenue. It also earns recurring revenue from the disposable surgical instruments and accessories that these machines use, accounting for 70% of total sales.

Overall, this business model works smoothly. Instruments and accessories revenue increased by 22% year over year to $986 million in the most recent reported quarter. The company brought in total revenue of $1.7 billion in the quarter. Its adjusted net income increased to $437 million from $413 million in the prior-year quarter.

We will know more about Intuitive's performance this year when it releases its second-quarter earnings on July 20.

Intuitive's dominance will be difficult to challenge

Intuitive has many competitors in the robotic surgery market, including Medtronic, Johnson & Johnson, and Stryker, but none come close to its position. Because of its early mover advantage, it has a leading 80% market share in robotic surgery and is expected to lead at least through 2031.

According to experts, the global robotics market will grow at a compound annual rate of 10% over the next several years, reaching $17 billion by 2031. With the industry's rapid growth, having an economic moat gives Intuitive an enormous edge over its rivals.

Furthermore, hospitals spend a lot of money not only buying the systems but also training surgeons to use them. It requires an initial capital investment ranging from $500,000 to $2.5 million. Even if a less-expensive product is available, hospitals are unlikely to make the switch compared to a highly successful product.

Intuitive is also branching out beyond its core robotics business. In 2020, it acquired Orpheus Medical, a privately held company that provides clinical and imaging documentation to hospitals.

Intuitive not only has outstanding revenue and profit growth, but it also has a strong balance sheet to fund future expansion. At the end of the quarter, it had $6.6 billion in cash, cash equivalents, and investments, which could support its strategy of developing more innovative products.

ISRG Chart.

ISRG data by YCharts.

Intuitive's astounding growth in the last five years has boosted its stock price, helping it massively outperform the market. This year alone, the stock is up 33% compared to the S&P 500's rise of 17% -- which could lead some investors to find the stock a bit expensive now. 

However, the long-term prospects of the robotic surgery market and Intuitive's dominance in this industry should help its stock surge further in the next few years. This growth stock continues to have the potential to be a promising investment for long-term investors.