Intuitive Surgical, Inc. (NASDAQ:ISRG) has created a large amount of wealth for early investors, increasing from about $8/share to about $600/share over the last decade. However, the share price has dropped about 20% to below $460/share due to a couple of recent reports questioning the advantages of robotic surgery over conventional surgery. Also, a probe by U.S Regulators to investigate the cause of incidents has also contributed to this decline. This decline has provided an opportunity for investors to get in at a very attractive price.
Reasons to Invest in Intuitive Surgical
Intuitive Surgical, Inc. (NASDAQ:ISRG)’s financial results have been excellent. Over the last five years, sales have increased from $875 Million to $2.2 Billion and net income has increased from $200 Million to $650 Million.
A growing portion of Intuitive Surgical’s sales are due to recurring revenue, which consists of a wide variety of accessories used for each surgery. Recurring revenues in 2012 were $1.25 Billion, or 57% of total revenues. This is the classic razor blade business model.
The types of surgeries have increased over time. Current surgery types performed by the Da Vinci include urology, gynecology, cardiology, general surgery, and head and neck surgery. There is potential for the surgery types to be expanded in upcoming years.
Conventional surgery is the main form of competition. There are other robotic surgical companies that are currently used for different types of procedures. MAKO Surgical Corp. (NASDAQ:MAKO) is a company that utilizes robotic surgical technology in a different way. MAKO Surgical Corp. (NASDAQ:MAKO) markets its MAKOplasty orthopedic procedures to treat early to mid-stage osteoarthritis of the knee and to complete total hip replacements. The RIO Robotic Arm Orthopedic System is used to provide reproducible precision for MAKOplasty procedures. MAKO Surgical Corp. (NASDAQ:MAKO) is also trading at an attractive price at $12.25, which is well below its all-time high of over $40/share.
The Bottom Line
In my opinion, Intuitive Surgical, Inc. (NASDAQ:ISRG) would not have gotten this far if the benefits of the da Vinci system had not been proven. There are a very large number of detailed reports that confirm the benefits and I believe that they are valid. Also, the large number of hospitals that have purchased the da Vinci systems would not make this level of investment without doing extensive research to verify the effectiveness and the benefits of the da Vinci system.
Regardless of the outcome of the investigation by U.S. Regulators, I believe that Intuitive Surgical, Inc. (NASDAQ:ISRG) will survive and become a stronger company. However, even one incident resulting in death is too many and if the da Vinci is proven to be the cause some of these incidents, they should and will be held liable. If the da Vinci system is the reason for any incidents, a positive outcome would be corrective actions that result in a reduced number of incidents in the future. Surgery is always dangerous and as with conventional surgery there will be incidents. However, I believe that the da Vinci system will continue to be the safest, quickest and least painful form of surgery.
As with any stock, Intuitive Surgical, Inc. (NASDAQ:ISRG) has some risks associated due to the pending investigation. I believe that the long term rewards outweigh these risks and that now is a good time to consider opening or adding to a position in Intuitive Surgical.
The article An Attractive Time to Invest in Robotic Surgery originally appeared on Fool.com and is written by Greg Williamson.
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