Is Intuitive Surgical, Inc. (ISRG) Cheap After the Recent Plunge?

Medtronic, at $52.80 per share, is worth $53.20 billion on the market. The market values Medtronic at 9.4 times its trailing EBITDA, lower than the EBITDA multiple of Intuitive Surgical, Inc. (NASDAQ:ISRG). However, its PEG ratio is higher than Intuitive Surgical, at nearly 2. The company has laid out several near-term drivers to sustain its top line and bottom line growth, including key business stabilization, several meaningful product launches, focusing on emerging market growth, product cost savings and SG&A leverage, and a disciplined capital allocation. For the full year 2014, Medtronic expected to grow its revenue at around 3%-4%, with the SG&A operating leverage reduced about 30-50 basis points. Medtronic estimated that it could generate more than $25 billion in free cash flow in the next five years. Within that $25 billion free cash flow generated, it could return more than $12.5 billion in cash via both form of buybacks and dividends to its shareholders.

My Foolish take

Among the three companies, Intuitive Surgical, Inc. (NASDAQ:ISRG) seems to be the most profitable with the highest operating margin at 41%, while the operating margins of Accuray and Medtronic are much lower at -25% and 29%, respectively. Intuitive Surgical seems to be a good growing business to hold in a long run. However, at this current price, it still seems to be quite expensive. I would rather wait for an additional price correction before initiating a long position in this stock.

The article Is Intuitive Surgical Cheap After the Recent Plunge? originally appeared on Fool.com and is written by Anh Hoang.

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