I'm a believer in growth stocks. As an analyst for our Motley Fool Rule Breakers service, I think you should be a believer too. But even I have to admit some growth stories are bogus, hence this regular series. We'll be taking a closer look at many of the market's great growth stocks to see which of them show real, numerically relevant signs of sustainability.

Next up in our series is Intuitive Surgical (Nasdaq: ISRG), one of David Gardner's very best picks for Rule Breakers -- a multibagger that has forever changed technology's role in surgery and treatment, and by extension altered the stature of medical technology as an investment class.

No longer are biotechs the only option for rebellious health care investors. Device and instrument innovators such as Accuray and Cyberonics possess similar multibagger potential.

Foolish facts

Metric

Intuitive Surgical

CAPS stars (out of 5)

****

Total ratings

3,842

Percent bulls

94.1%

Percent bears

5.9%

Bullish pitches

618 out of 657

Highest rated peers

Shamir Optical Industry, Cutera, Vision-Sciences

Data current as of Sept. 1.

Most, but not all, Fools love Intuitive Surgical. Here's a closer look at the bear case, as presented by CAPS investor kachingg:

[Intuitive Surgical's technology] does improve recovery but not long term outcome. physicians and hospitals do not receive higher reimbursement for using it. In fact, it is expensive and wastes hospital budget and taxpayer money on procedures that can be just as easily performed by laparoscopy.

The elements of growth

Metric

Last 12 Months

2009

2008

Normalized net income growth

61.8%

22.4%

38.8%

Revenue growth

39.9%

20.3%

45.6%

Gross margin

72.5%

71.4%

71%

Receivables growth

11.1%

20.7%

30.5%

Shares outstanding

39.4 mil.

38.5 mil.

39.2 mil.

Source: Capital IQ, a division of Standard & Poor's.

Bearish arguments notwithstanding, there's little in this table that's worth quibbling with. Let's review:

  • As the bold text shows, net income growth is accelerating after a dip in 2009. That's a good sign; it suggests continued demand for the daVinci robot.
  • Gross margin is high and rising. As an innovator and market leader, Intuitive Surgical appears to possess pricing power.
  • Shares outstanding are stable, which suggests that management is funding growth through existing free cash flow. (A job they're good at: return on capital has increased to 19.6% over the trailing 12 months.)

Competitor checkup

Competitor

Normalized Net Income Growth (3 yrs.)

Hitachi (NYSE: HIT)

9.1%

Intuitive Surgical

48.8%

Olympus Corp.

(19.8%)

Toshiba Corp.

(28.7%)

Sources: Capital IQ. Data current as of Sept. 1.

Going by this table, Intuitive Surgical is well ahead of larger peers in capitalizing on its market opportunity. To a degree, this is to be expected. Intuitive Surgical is a specialist and Hitachi is as much a force in data storage as it is medical devices. Olympus also makes cameras, and Toshiba computer equipment.

And yet this table says something extremely important about Intuitive Surgical. While revenue and income growth is high, it's also accelerating. Investors buying today are buying into a growth story.

Grade = sustainable
My guess is Intuitive Surgical will keep expanding. Robotic surgery is precise, less invasive, and allows experts from anywhere to perform complex procedures. There are simply too many benefits for me, a business-focused investor, to ignore. That's why I've rated the stock to outperform in my CAPS portfolio.

Now it's your turn to weigh in. Do you like Intuitive Surgical at these levels? Would you make it one of our 11 O'Clock stocks? Let the debate begin in the comments box below, and when you're done, click here to get today's 11 O'Clock portfolio pick.

You can also ask Tim to evaluate a favorite growth story by sending him an email, or replying to him on Twitter.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Intuitive Surgical is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy thinks Monty Python is sustainably funny.