Today, I would like to introduce you to a medical technology stock that has been a favorite among investors for a long time and is therefore also equipped with a significant valuation premium. However, it is often worth paying a little more for quality. Just like with Intuitive Surgical.

Brief profile Intuitive Surgical is the market leader for surgical robots. The company’s most important product is the so-called „Da Vinci“ surgical system, a robot-assisted surgery system that is now used in numerous major clinics around the world.

The company, founded in 1995, now has the 3rd generation of its surgical system on the market. With each generation, the system’s application possibilities increase, as well as the number of patients that can be treated with it. Originally developed for urological procedures, the Da Vinci surgical system is now also used for procedures in the intestinal area, stomach, heart, liver, esophagus, and gallbladder.

Intuitive Surgical not only earns a tidy profit from the sale of the up to 2 million euro surgical robots, but also from the necessary surgical instruments. These can only be used ten times (counting the surgical system) and must then be reordered from Intuitive Surgical – an extremely reliable source of income for the company and an important factor for its steady growth.

Stock ambitiously valued This high quality comes at a price on the stock market in the form of a significant valuation premium. In recent years, the stock has usually been ambitiously valued, with the price-earnings ratio typically between 50 and 80.

At such a valuation, the company cannot afford any weaknesses. Investors always want to see double-digit growth rates, otherwise they are disappointed.

Optimistic forecast leads to stock jump The new year started off very well for Intuitive Surgical shareholders: Management has already announced some key data for the fourth quarter: According to this, preliminary sales increased by +17% to 1.93 billion US dollars – previously expected were 1.87 billion US dollars. This means that the growth rate in the last quarter of 2023 was four percentage points higher than in the entire year.

And the management of the world market leader for surgical robots is optimistic that the momentum will continue into the new year. For 2024, the number of operations supported by Da Vinci surgical systems is expected to increase between +13% and +16%. This is also higher growth than previously forecast.

The stock reacted to this with a jump of around +10%. Short-term developments are likely to depend on further numbers from the quarterly report, which will be published next week.

For long-term oriented investors, the stock remains interesting despite the ambitious valuation, as Intuitive Surgical is likely to consistently deliver double-digit growth rates in the coming years.