Intuitive Surgical Revenue Bounces Back After Pandemic Pause

Robotic medical equipment maker Intuitive Surgical NASDAQ: ISRG is correcting below its September 8 high of $1087.01. So far, it's holding well above the structure low of $797.71 from its most recent base, which formed between April and June.

The stock is also finding support above a July 19 session low of $926.48, when shares pulled back to their 21-day moving average.

Intuitive Surgical was a leading growth stock in the early 2000s, when its da Vinci surgical system was first catching on among doctors and hospitals. It's not always the case that a stock has a long lifespan as a fast grower, and even this stock went nowhere for nearly four years, from mid-2012 through mid-2016.

Intuitive Surgical pioneered robotic surgery, rolling out its first devices way back in the late 1990s. Today, the company still touts its equipment's role in minimally invasive approaches to surgery. Originally its gear was used in cardiac surgery, but today it's used in numerous surgical applications, including hysterectomies, thyroid cancer treatment, gastric bypass, prostate surgery, lung biopsies and more.

With the number of da Vinci systems in use worldwide topping 6,000, the equipment is growing in acceptance among medical professionals.

In addition to the da Vinci system, Intuitive Surgical makes the Ion, a robotic-assisted platform for minimally invasive peripheral lung biopsies.

Sales numbers bear that out. Revenue accelerated in the past two quarters, after a slowdown in 2020, when elective surgical procedures were put on hold.

In the most recent quarter, sales came in at $1.464 billion, a 72% increase over the year-earlier quarter. The three-year annualized revenue growth rate is 11.57%.

Earnings also accelerated in the past two quarters, from 3% to 253%. Earnings per share came in at $3.92 in the most recent quarter.

Other three year metrics include:

• Operating Income -0.41%
• Net Income 16.49%
• Diluted EPS 15.19%
• Return on Assets 14.49%
• Return on Equity 16.58%
• Return on Invested Capital 16.58%
• Net Margin 31.43%

One reason this company is returning to prominence as a top growth stock: Revenue is growing at a faster clip than before the pandemic. One important element of Intuitive Surgical's business model is the sale of accessories. Not only does the company sell the basic machinery, but also software and various attachments.

When the company reported its second-quarter in July, it revealed several promising developments.

• Worldwide da Vinci procedures grew approximately 68% compared with the second quarter of 2020. The second quarter of 2020 reflected significant disruption caused by the pandemic, and the second quarter of 2021 reflected a continued recovery in procedures and also included the performance of a number of procedures that were deferred during the pandemic. The compound annual growth rate between the second quarter of 2019 and the second quarter of 2021 was 16.5%.
• The company shipped 328 da Vinci Surgical Systems, an increase of 84% compared with 178 in the second quarter of 2020.
• The company grew its da Vinci Surgical System installed base to 6,335 systems as of June 30, an increase of 10% compared with 5,764 as of the end of the second quarter of 2020.

Of course, no successful company lives in a vacuum without competition. While Intuitive Surgical was the first mover in its corner of the medical device industry, other companies developing robotic surgical gear include Johnson & Johnson, Siemens, Stryker, Medtronic and Zimmer Biomet.

Nonetheless, analysts expect Intuitive to earn $14.66 per share this year, an increase of 44%. Next year, that's seen rising another 12% to $16.38 per share.

According to MarketBeat data, analysts have a "hold" rating on the stock, with a price target of $983.67, representing a 2.56% downside.

Given the fact that the stock is already consolidating, that's not a bad estimate at all. So far, the stock's current consolidation has corrected 10%, not at all unusual for a growth stock pullback. Relative to the broader market pullback, Intuitive Surgical is holding up better, which is what you want to see on a watch list stock.

At this juncture, you're still looking for the stock to surpass the previous high of $1087.01, ideally in heavier-than-normal volume.