When Intuitive Surgical (NASDAQ:ISRG) reported better-than-expected second-quarter results last month. Investors responded optimistically. Shares rose 13% in after-hours trading and continued to rise during the next few trading days. At the stock's highest point after earnings, shares traded around $560. But as the news of the hot quarter faded into the past, shares pulled back a bit, to $521.

 Is the pullback a buying opportunity, or is Intuitive Surgical fully valued?

Da Vinci Xi

Da Vinci Xi. Image source: Intuitive Surgical.

Priced for perfection?
Looking at Intuitive Surgical's underlying business in relation to its stock price, it's easy to see why investors may have trouble justifying a $525-plus share price.

In the last few years, Intuitive Surgical's revenue has mostly remained the same. Between 2012 and the trailing 12 months, its top line has seen little growth, staying around $2.1 billion to $2.3 billion. And putting Intuitive Surgical's lack of sales growth into further perspective, a trailing-12-month revenue of $2.3 billion is only slightly ahead of its 2012 revenue of $2.2 billion.

Free cash flow has fared even worse. The company's 2012 free cash flow of $672 million is ahead of its trailing-12-month free cash flow of $542 million.

Looking back at the past few years, therefore, it's difficult for investors to price in growth going forward. Priced at about 39 times earnings and about 36 times free cash flow, Intuitive Surgical's stock is essentially priced for double-digit earnings and free cash flow growth over the next five to 10 years. In other words, investors are counting on the company's business to grow faster in the future than it is currently.

Of course, investors aren't trading Intuitive Surgical blindly. There is a reason for the bullish outlook. A few catalysts, including its recently revamped Da Vinci, utilization growth, and geographic expansion, look poised to drive sales higher in the future.

Still, counting on sales growth to ramp in the future isn't exactly a low-risk investing strategy. It makes sense, therefore, that shares have pulled back since the run-up following Intuitive Surgical's better-than-expected second-quarter results.

Why investors should do nothing
Opportunistic investors may be wondering whether the recent sell-off is big enough to make the stock a buy. Unfortunately, shares are probably still too pricey. Sure, Intuitive Surgical's Da Vinci is exciting, its business model is sustainable, and growth drivers look impressive. But the company is essentially priced to execute perfectly.

To justify Intuitive Surgical's current valuation, future free cash flow would need to rise about 15% annually going forward. While certainly possible, investors may want to look for either a bigger sell-off or for the company to start proving it can consistently deliver this sort of growth before considering buying shares.

Of course, just because Intuitive Surgical's growth opportunity seems fully priced into the stock today doesn't mean investors who already own shares should sell. Not only could the company exceed expectations, but also management's continued excellent execution continues to provide shareholders reasons to hold on.

Calling Intuitive Surgical stock a hold, at this point, seems most appropriate.

Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Intuitive Surgical. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.