Intentional surgery (ISRG 3.36%) Considerable challenges have been faced in the past year, especially related to tariffs. The company’s shares have lagged behind broader equities as a result, and with the trade war far from over, the medical device specialist’s near-term prospects look dim. However, psychosurgery has features that can help overcome these challenges and do well in the long run. Is the stock worth buying right now? Let us consider both sides of the argument in a little more detail.
Image source: Getty Images.
Value may be another matter
The financial results of psychosurgery still look great. In the fourth quarter, the company’s revenue rose 19% year-over-year to $2.87 billion, while adjusted earnings per share rose 14.5% to $2.53. All that as a result of a 17% increase in the procedures performed with its crown jewel, the da Vinci surgical system, the installed base during this period also reached 12,1106 compared to the year.
Here is the problem. The impact of tariffs on Intuitive Surgical’s financial results could be material over time. Meanwhile, the company is The robotic-assisted surgery (RAS) market faces increased competition from other medical device manufacturers, such as Medtronic Recently received approval for its Hugo system, and Johnson & Johnson Can also start your system relatively soon.
In the midst of all that, Smart Surgery still trades at 47.6 times forward earnings, compared to the average forward price-to-earnings ratio of 17.1 for healthcare stocks. Alternative surgery certainly deserves a premium as long as there is little competition and tariffs do not significantly affect outcomes. Now that things have changed, many investors are wondering if the stock is worth its current level, or if, given its value, Psychosurgery’s stock could fall even further.
Today’s change
((-3.36%) $-15.73
current price
dollar452.82
Important information points
Market cap
$161B
The range of the day
dollar451.56 – Dollars466.76
52wk range
dollar425.00 – Dollars603.88
Volume
94K
Average volume
1.9M
Gross margin
65.98%
Some reasons for optimism
The RAS market should expand over the next decade, as it currently stagnates, even as robot-assisted devices enable minimally invasive surgery with significant advantages over open surgery. The former is done with small instruments that avoid opening the skin to have direct access to the internal organs. The results are often less bleeding, less scarring, and faster patient recovery. Even with increased competition, Intuitive Surgical has built a wide moat from multiple sources, including cost-shifting — its devices are deeply embedded in the U.S. health care system and are even used to train surgeons — and plenty of real-world data showing the effectiveness of its da Vinci system.
With an expanding market and a strong competitive edge, neurosurgery is well positioned to ride the RAS market wave. A number of other factors could improve its financial results over the next 10 years. First, intelligent surgery should obtain more indications for this da Vinci system, as it has done historically. This will help increase the volume of the process. And secondly, as procedure volume grows, so does the company’s revenue from devices and accessories. Since these are regularly deployed, they provide a constant source of income for the neurosurgery.
Appliances and accessories are also likely to have higher margins than appliance sales, so the company’s margins can grow as well. But how will the intention surgery deal with the tariffs? With an estimated negative impact on net income of around 1.2% this year, the company could finally make up for it by raising prices a bit. Even modest price increases distributed to thousands of customers can wipe out the impact of tariffs on a company’s top line. And Intelligent Surgery can demonstrate this by considering market-leading technology and patient outcomes, which gives it some degree of pricing power.
In my view, the tariffs are not fatal to the company’s prospects, even assuming they stay out of the current administration, which is not guaranteed. So, is brain surgery worth investing in right now? My view is that even though the stock may remain volatile over the next year or two, it remains an excellent choice for investors to hold over the next decade.
#Psychosurgery #Buy #Motley #Fool