Intuitive Surgical (ISRG +7.16%) has quite a few traits that make it a desirable stock to buy and hold for long periods. Aside from being a leader in the robotic surgery space, it's consistently profitable, and it has a clear roadmap to keep growing its revenue and earnings at a moderate pace for the foreseeable future.
There's little reason to doubt that it can execute on the same business plan that has carried the company to its present heights. In fact, there's now one more reason to buy the stock and hang on to it.
NASDAQ: ISRG
Key Data Points
It's bullish to demonstrate product leadership
On March 14, the Food and Drug Administration (FDA) approved the fifth iteration of Intuitive's da Vinci surgical robotics suite. But this was far more than a few incremental improvements, and understanding why the launch constitutes a reason to buy the stock will require a little digging into the specifics of its features. While the company claims that the new edition has 150 updates and improvements, there are two that are particularly important in the context of its continued dominance in the robotic surgical space.
First, the surgeon's station has been redesigned, and it's now more fully configurable to suit different postures and body shapes. Those new features should make clinicians a bit more comfortable, which will probably improve their sentiment about the da Vinci overall. There's a decent chance they'll be more interested in evangelizing about the suite's capabilities as a result, which could drive marginally faster adoption rates, but based on the company's customer survey data, users were pretty happy already.
More importantly, the latest da Vinci model features a haptic feedback system that allows surgeons to physically feel on their hands when their robotic toolhead encounters pressure during an operation. The point of such a system is that it helps surgeons to apply precisely the correct amount of force while operating the robot, which could cut down on the amount of unintended trauma, potentially helping patients to experience better outcomes like faster recovery times. Per management, no other robotic or minimally invasive surgery technology has anything comparable yet, but it's obviously a feature that will be in demand moving forward.
Why this stock is worth holding forever
So Intuitive is still innovating with its flagship product by introducing sought-after features that its customers are going to get a lot of mileage out of, and it won't likely be stopping.
After rising by 461% over the last 10 years, its trailing-12-month research and development (R&D) expenses are close to $1 billion, or around 14% of its annual revenue. But those R&D dollars aren't going solely to developing big product overhauls like the da Vinci 5. Instead, many of those resources are devoted to making new imaging systems, robotic toolheads, training programs, software packages, and other accessories.
All of those additional items can then be sold to hospitals that already own the main robotics suite, generating revenue. In total, secondary instruments and accessories brought in $4.2 billion last year, compared to $3.5 billion in 2022.
The launch of new editions of each product is favorable too; some of the more complicated new features in the da Vinci 5 will doubtlessly come with additional maintenance requirements. And customers dole out for maintenance services on a regular basis, leading to plenty of repeat sales for Intuitive. In 2023, those services yielded $1.1 billion in revenue, up from $1 billion a year prior.
Long term, investors should anticipate Intuitive continuing to build on its lucrative business model. It's strongly profitable, adding to its top and bottom lines, and it only holds $90 million in debt.
Over the last 10 years, by repeatedly successfully executing on the exact same model, its share price rose by 722%, dramatically outperforming the S&P 500's growth of 235%. The only potential obstacle to its doing a repeat performance over the coming 10 years is that competitors will eventually start to encroach on its market.
But today, there's no sign of other players being a problem. Most competitors are making specialized systems for applications like orthopedic surgery, which is to say that their products are not capable of performing as many different surgeries as the da Vinci. None have anywhere near the footprint of its 8,606 surgical suites deployed worldwide.
In other words, this company is going to continue reigning as the king of the robotic surgery market for a long time, and that's another reason to buy its stock.
