Robotics is transforming many industries, and one of the biggest winners is in the healthcare field. Using robots in minimally invasive surgery has been shown to reduce the likelihood of complications, shorten hospital stays and reduce mortality. One player in particular dominates this market, increasing the system's installation base, amount of procedures and revenue in the double digits of the last quarter.
I'm talking about intuitive surgical (ISRG) 0.70%))the world's leading surgical systems company: da Vinci. Stocks are delivered in the long term and short term, with nearly 200% increase over five years, and have moved up around 13% so far this year. And from here there's still a lot of room to run.
Take a closer look at the intuitive stuff and discover why buying it for $600 now is the ultimate healthcare robot stock.
Image source: Getty Images.
What is the Da Vinci Surgery Robot?
As mentioned before, intuitive is the manufacturer of Da Vinci, a robotic system used for many minimal invasive procedures, from hernia repair to hysterectomy and gastric bypass surgery.
The latest version of Da Vinci 5 has been used in over 40 procedure types so far. The model holds 10,000 times the computing power of the company's Da Vinci XI, providing greater autonomy and advanced data analysis capabilities for surgeons. Intuitively, we recently launched the Da Vinci 5 and continue to sell a variety of Da Vinci models, including XI, to meet the diverse needs of hospitals and surgeons.
Two in particular ensure an intuitive market advantage and the potential for continuous revenue growth. The first is the firm moat, or competitive advantage of the company. Da Vinci Robot represents an investment of over $1 million in hospitals. This means that these buyers are not easily able to switch to a rival system, as they aim to amortize their purchases over time.
To further enhance this, surgeons will generally train with Da Vinci robots, so they will likely prefer to use these systems instead of learning to use an entirely new platform. This means supporting the idea that they will stick to Da Vinci.
The second major intuitive strength is how you generate revenue. The company actually doesn't make up a large portion of its revenue through the sale of its Da Vinci robots. Instead, they bring about a large portion of their revenue through the sale of accessories and equipment needed for each step. This is great. This means that the more hospitals use their robotic systems, the more revenue they can generate intuitively. It also ensures that once a hospital purchases or leases the system, it will not end the company's revenue growth. In fact, revenue growth opportunities are just beginning.
Revenue growth and recurring revenue
In the recent quarter, for example, Intuitive has brought in $654 million from system placement and more than $1.4 billion from equipment and accessories sales. All of this has led to stable revenue growth and recurring revenue over time. Last year, 84% of its $8.4 billion revenue was repeated, the company said.
And the latest figures provide reasons to be optimistic about potential sales growth in the future. In the most recent quarter, of the intuitive 493 Da Vinci system (compared to 415 year-on-year) and its placement, 174 were Da Vinci 5 robots.
Now, let's consider the evaluation. The intuitive stock trades estimates of progressive revenues by around 70 times, but they are not cheap. However, the company's market leadership, solid moats and repeated revenues deserve premiums. Intuitively, it has proven its ability to increase revenue over time, with stock prices continuing to bring profits to investors. So I don't think my current valuation will stop me from buying this stock.
Instead, I will focus so far on intuitive performance and future prospects, as well as its financial stability. The company concluded its most recent quarter with more than $8.8 billion in cash. And with these points in mind, the intuitive ones look like the ultimate healthcare robotics company to buy now for $600 and hold for the long term.
Adria Cimino has no position in any of the stocks mentioned. Motley Fool has an intuitive surgically positioned and recommends. Motley Fools have a disclosure policy.
