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MAKO vs. Intuitive Surgical: The First 5 Years

By Dan Carroll - Nov 15, 2012 at 10:01AM

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Stock's five-year anniversary next February hasn't quite realized lofty growth projections

It's a time to celebrate an upcoming anniversary! Next February, MAKO Surgical's ( MAKO.DL ) stock turns five years old after the company went public back in 2008. During that time, however, shareholders have seen only modest gains: MAKO's stock has risen just 43% over its life. Many investors still hold out hope that MAKO will follow in the footsteps of robotic surgery's brightest star and growth stock, Intuitive Surgical ( ISRG -1.36% ). To see if the company's achieving those lofty dreams, let's compare MAKO today to how Intuitive was doing at its stock's five-year anniversary back in mid-2005.

A tale of two stocks
Intuitive did enjoy a much better economy in the early 2000s, but the company's stock was absolutely smoking in 2005 at the time of its fifth anniversary. Shares in June of that year had risen more than 128% since its IPO in June 2000. The stock actually hadn't done well before the final year of that span; from June 2004 to 2005, however, shares jumped more than 171%.

MAKO can't say exactly the same story. The stock has a few months to go before it turns five, but pressures from Europe and a struggling global economy have put pressure on today's medical device industry --- and MAKO's shares. In the past year, the stock has fallen more than 50% despite improving sales of MAKO's RIO robotic surgical system and decreasing losses.

The stocks certainly paint a picture of differing fortunes, but how do MAKO's unit sales and numbers stack up against the robotic surgical industry's star?

What's behind the difference?
So far, MAKO has sold 141 of its RIO systems. That's not bad, particularly considering that hospitals are tightening budgets these days and don't often have the resources to pay for a $1 million robotic device. Compared to Intuitive's fortunes early last decade, however, MAKO's success looks paltry.

Intuitive sold 76 of its da Vinci Surgical Systems in 2004 alone, and had placed 286 systems  in total by the end of that year. MAKO, by contrast, has sold 30 units  in nine months of 2012 so far; even with an optimistic fourth quarter, it's unlikely the company will even match Intuitive's 2002, when it sold 60 da Vincis This translates to revenues: While MAKO has recorded sales of more than $72 million this year, the company faces an impossible climb to reach Intuitive's 2004, when that company recorded more than $138 million in full-year revenues.

It probably hasn't hurt Intuitive that the da Vinci system supported a wide array of procedures in 2004, with applications in urologic surgery, heart  and chest surgery, gastric bypass, and more. That advantage has continued to this day, with the da Vinci offering a wide and diverse range of applications. MAKO's orthopedics-oriented  RIO appeals to a more specialized niche.

A major reason behind Intuitive's financial advantage lies in SG&A costs. MAKO has recorded those costs spiraling to almost $60 million  in just the last nine months alone. For 2004, Intuitive's full-year SG&A costs  were only $49 million.

In all, MAKO hasn't yet achieved (and doesn't seem likely to pull off in 2012) what Intuitive did in 2004 -- reporting its first year of profitability. Intuitive listed quarterly earnings per share of $0.25 in 2005's first quarter, three months ahead of its stock's fifth anniversary. In its most recent quarter, just mere months ahead of its own fifth anniversary, MAKO reported a loss of $0.15 per share.

Intuitive 2.0? Not yet
It's tough on MAKO to compare it to the brightest company in the robotic surgical field; after all, Intuitive has set a high standard. MAKO investors expecting to be Intuitive 2.0 should temper expectations; with a tougher economy that's particularly affecting the medical device industry and stiffening competition, MAKO will likely continue its slow climb to profitability and success. MAKO is still a good growth stuck with plenty of potential, but expecting massive, quick gains from this stock will only leave you disappointed. Its first five years of being publicly traded haven't quite been Intuitive, after all.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Intuitive Surgical, Inc. Stock Quote
Intuitive Surgical, Inc.
$319.93 (-1.36%) $-4.41
MAKO Surgical Corp. Stock Quote
MAKO Surgical Corp.

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