You may have come in close contact with Intuitive Surgical (ISRG 2.87%) if you've ever had hernia repair, gallbladder surgery, or other minimally invasive surgeries. The company's flagship Da Vinci surgical robot helps surgeons perform many procedures across the general surgery spectrum and extends into specialty areas -- from gynecology to urology.
Intuitive Surgical is the worldwide leader in robotic surgery, and this has helped the company build a long track record of earnings growth and stock market performance. This is great -- but there is one reason in particular I'd buy Intuitive Surgical stock and never sell. Let's check it out.
Image source: Getty Images.
Several Da Vinci options
First, though, a quick look at this robotic surgery specialist's path so far. The company offers surgeons four versions of the Da Vinci, ranging from the value-focused Da Vinci X to the latest release, the Da Vinci 5. This newest offering features more than 150 design innovations and allows for greater surgeon autonomy and improvements in workflows.
The company has a solid moat, or competitive advantage: Most surgeons train on the Da Vinci, so it's very likely they will continue favoring this platform that they know well. On top of this, hospitals, after investing often millions of dollars in a surgical robot, aim to amortize the investment. So they, too, probably won't search for opportunities to switch.
As mentioned, Intuitive Surgical has proven its strength over time, with gains in earnings and growth in the placement of systems. In the most recent quarter, the momentum continued as the company grew its installed base of systems by 12% to more than 11,000 year over year. Revenue climbed 19% to more than $2.8 billion, and procedure growth increased 18%. The company also increased net income 16% to $794 million.
A revenue stream you can count on
All of this is fantastic, but here's the one reason in particular I would buy Intuitive Surgical and never sell: Every sale or lease of a Da Vinci platform is the company's ticket to recurrent revenue, and this revenue generated actually beats the revenue level of systems sold. I'm talking about instruments and accessories revenue. These are disposable tools that need to be replaced, meaning that as hospitals increase Da Vinci procedures, they must order more instruments and accessories.
This is positive as it means that Intuitive Surgical's revenue opportunity doesn't stop when it sells a Da Vinci system -- instead, it's only beginning. In the recent quarter, instruments and accessories revenue totaled $1.6 billion, and that's compared to about $785 million for robotic systems.
The sales of these tools offer Intuitive Surgical a steady growth engine -- and that's an excellent reason to buy this top robotic surgery stock and never sell.
