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Underperform pick

Company Mako Surgical (Nasdaq: MAKO)
Submitted By: TSIF
Member Rating: 99.92
Submitted On: 5/23/2011
Stock Price at Underperform Recommendation: $31.57
Mako Surgical Profile
Star Rating****
HeadquartersFort Lauderdale, Fla.
IndustryHealth Care Equipment
Market Cap$1.27 Billion
Industry PeersOpko Health (AMEX: OPK)
Hansen Medical (Nasdaq: HNSN)
Medtronic (NYSE: MDT)

Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.

This week's pitch:

Mako Surgical has had an excellent run the last six months and is a 3 bagger for faithful holding longs. Overall they are gaining analyst and institutional support. Some of the rise is the comparison to Intuitive Surgical [(Nasdaq: ISRG)] which is up 32X since 2003. I'm not sure if the comparison is close and I do understand the value of finding an entry position in a promising equity, but I expect a correction to occur soon.

Mako Surgical continues to lose money and while I agree that when Mako Surgical does book a profit that it will be a nice catalyst for the stock, at this point however the P/B of 11.3, P/S of 26 and the negative cash flow do not support the 3X rise. A 26% short position could cause another spike upward should Mako Surgical issue any "surprises," but overall I believe this run is done. It's hard to argue at times with momentum stocks as the top is very difficult to call, but I think the risk/reward is back down on this one. (Estimating sub $22).

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