Investors are a fickle bunch.
Over the last few months, they dragged down Intuitive Surgical
I mean really, was the lowered guidance such a big shock to anyone?
This recession has taken no prisoners. It's knocked down the usual suspects that you'd expect to show weakness -- cruise operator Carnival
And yet, here Intuitive Surgical sits, trading for 24 times free cash flow, which doesn't seem at all unreasonable given that it's expecting revenue growth of 15% this year. Earnings and free cash flow will presumably see a more substantial growth as most of that increase in revenue is expected to come from sales of higher-margin accessories; sales of systems are expected to remain flat.
And keep in mind that management has a way of being conservative with its guidance. This time last year, management was guiding for a 40% increase in revenues for 2008, and it looks like it'll come in at 46% ... even after the poor fourth quarter.
Investors with long-term horizons will likely see this downturn as a small blip on the general upward trend of the four-time Rule Breakers recommendation. What else would you expect from a company that can expect a 15% increase in revenue during bad times and 40%-60% growth during good times?