Operation turnaround
MAKO Surgical Corp. (NASDAQ:MAKO) was flying high with a stock price at $45 in March 2012. But a succession of bad quarterly reports sent the stock crashing down to lows of $10.30.
Like Mazor Robotics Ltd. – American Depositary Shares (NASDAQ:MZOR), Mako produces robotic surgical equipment, in this case for knee and hip surgery. Robotic surgery has been an area of interest since Intuitive Surgical, Inc. (NASDAQ:ISRG) produced huge returns – over 1,100% for investors following David Gardner’s Stock Advisor service. Peter Lynch advised that looking for “the next” was usually a mistake, but despite the recent price crash it seems that Mako has a chance of being the exception to this rule.
Mako is at a much later stage the Mazor, but it still has a little way to go before reaching profitability. It follows a “razor and blades” model: once a system sale has been made it produces a stream of consumable sales.
When Mako gets enough system sales out in the field, it will become cash flow positive on consumables alone. At this point, all future system sales become “gravy” instead of “necessity” – a very juicy situation from an investor’s point of view. If the company is successful, this will take about three years.
Stage one is to reach basic profitability. If Mako meets its sales targets of increasing its current installed base from 161 systems to just over 200, this will happen in about a year.
Given the company’s record of bad surprises and price crashes in the past, investors are sceptical that this can be achieved. But the company has restructured its management and sales operation and the early signs are encouraging.
The bottom line
Power Solutions International Inc (NASDAQ:PSIX), Mazor Robotics Ltd. – American Depositary Shares (NASDAQ:MZOR) and MAKO Surgical Corp. (NASDAQ:MAKO) are all risky, early stage investments that have potential for big gains. Westport Innovations Inc. (NASDAQ:WPRT) has a higher profile, but is also risky and a potential multi-bagger. In the words of Fool contributor Thomas Engle (TMF1000), “if it’s the next big thing a little is all I want, if not a little is all I need.”
If you decide to speculate on these potential multi-baggers, I can offer no better advice.
The article Jump In Early for the Biggest Multi-Baggers originally appeared on Fool.com and is written by Ian Richards.
Ian Richards owns shares in MAKO Surgical Corp. (NASDAQ:MAKO), Westport Innovations Inc. (NASDAQ:WPRT), Power Solutions International Inc (NASDAQ:PSIX) and Mazor Robotics Ltd. – American Depositary Shares (NASDAQ:MZOR). The Motley Fool recommends MAKO Surgical Corp. (NASDAQ:MAKO) and Westport Innovations. The Motley Fool owns shares of Westport Innovations Inc. (NASDAQ:WPRT). Ian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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