A leader in the medical device industry, Intuitive Surgical, Inc. (NASDAQ:ISRG) has been trounced year to date by the Dow Jones Industrial Average, rising only 2.00% compared to the 16.41% return offered by the blue chip average.
Intuitive Surgical, Inc. (NASDAQ:ISRG) designs, manufacturers, and markets da Vinci Surgical Systems and related instruments and accessories. Based on market capitalization, the company is valued at $20.09 billion. Fundamentally, the company’s business model is extremely strong, with a TTM profit margin of 30.59%. So is this medical devices innovator a strong investment in the medical trends of tomorrow or should investors think twice before investing in this company?
Strengths:
1). Explosive Revenue Growth: In 2003, Intuitive Surgical, Inc. (NASDAQ:ISRG) reported revenue of $91.7 million; in 2011, the company announced revenue of $1.75 billion, representing year over year annual growth of 44.71%, an explosive trend which is highly anticipated to sustain into the future with projections placing 2017 revenue at $4.17 billion. This growth has been a result of the rapid adoption of the company’s main product, the da Vinci Surgical System.
2). Institutional Vote of Confidence: 90.38% of shares outstanding are held by institutional investors, displaying the confidence some of largest investors in the world the company and its future.
3). Net Cash Position: Intuitive Surgical, Inc. (NASDAQ:ISRG) does not possess any debt on its balance sheets, however holds $2.9 billion of cash and cash equivalents, or roughly $73 per share, a major financial strength of the company.
4). Strong Cash Flow: In 2011, Intuitive Surgical, Inc. (NASDAQ:ISRG) generated $542 million in cash flow, representing the company’s financial security and strength.
5). Innovative Advantage Over Competitors: Their main product, the da Vinci Surgical System, has been proved to stand head and shoulders above its competition as the product allows the surgeon to perform precise movements, and has been shown, to in studies, be more effective and safe for the person being operated on, and is being adopted as the highest medical standard.
6). Margin Expansion: Over the past decade, Intuitive Surgical’s TTM profit margin has expanded from negative territory in 2004 to the current level of 20.71%, an extremely advantageous trend.
Weaknesses:
1). Lack of Dividend: The company currently does not pay out a dividend and at no time in the past expressed any plans to do so.
2). Heavy Reliance on One Product: The wide majority of the company’s revenue is derived from the da Vinci Surgical System and related accessories and services; this heavy reliance on one product could prove to be a major weakness.
3). High Valuation: At the moment, the company possesses a price to earnings ratio of 29.39, a price to book ratio of 5.59, and a price to sales ratio of 9.17, all of which indicate a company trading with a high valuation.
Opportunities:
1). Implementation of Dividend: The company possesses a relatively large cash position, and could choose to implement a dividend in the future.
