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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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The Motley Fool is investors writing for investors. Pitches must be compelling, made in the past 30 days, and be at least 400 words. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Medtronic. Motley Fool newsletter services have recommended buying shares of MAKO Surgical and Intuitive Surgical. The Motley Fool has a disclosure policy.