Intuitive Surgical: Is Long-Term Investment a No-Brainer?

Intuitive Surgical: A Leader in Robotic Surgery and Telesurgery

Intuitive Surgical (ISRG) makes surgical systems that are transforming the healthcare industry, making it easier for surgeons to conduct difficult surgeries. This can increase success rates in surgery and improve patient outcomes. With rapid advancements in artificial intelligence (AI), it's easy to envision how Intuitive Surgical may further benefit from next-gen technologies in the future.

Despite the long-term hope and promise, this healthcare stock has been struggling this year. As of the end of last week, Intuitive's stock has declined by 14%, and it recently hit a new 52-week low of $425. It has bounced off of that, but it's still struggling to gain much momentum.

If you're a long-term investor, could buying shares of this healthcare company be a no-brainer move right now?

Telesurgery: A Game Changer for Healthcare

You may have heard of telehealth, where patients can video chat with a doctor or nurse, but telesurgery could be much more transformative in the long term for healthcare. Intuitive recently demonstrated the potential for telesurgery where two doctors, one in Georgia and the other in France, were able to work together on a procedure (on an advanced tissue model) with the company's da Vinci 5 system.

The company says "there's still a long way to go," and it has been working on telesurgery for years, but there's significant potential here. If a patient can obtain access to care without needing to physically be where a surgeon is, that can drive down costs and also result in obtaining necessary care sooner.

The telesurgery market was worth just $2 billion in 2023, based on estimates from Grand View Research. But it is growing and could be worth nearly $6 billion by the end of the decade. In the longer run, there may be even more growth, particularly as AI adds efficiency and helps bring down costs. AI can lead to the development of more intelligent and effective surgical tools, reduce human error, and provide valuable insights to surgeons during procedures, ultimately leading to better patient outcomes.

Significant Growth in Intuitive's Business in Recent Years

Intuitive's machines aren't cheap, and the new da Vinci 5 surgical system can cost well over $2 million. But given how much they can aid in surgery and improve outcomes for patients, the company has been able to do well and grow its operations at a fairly high rate. What's particularly promising is that Intuitive has been able to grow its bottom line at a faster rate than earnings in the past five years.

As of June 30, the company's install base of surgical systems totaled 10,488 -- an increase of 14% from a year ago. And in its most recent quarter, there was a 17% increase in the number of da Vinci procedures compared with the prior-year period. Despite not being cheap machines, demand has been fairly strong.

Tariffs are weighing on the company's earnings, but Intuitive is still projecting growth of up to 17% in the number of da Vinci procedures this year (a key metric for the company to show adoption is high), which is similar to its growth rate from a year ago. It expects its gross profit margin to fall by a percentage point due to tariffs, but overall, it should remain fairly strong, between 66% and 67%.

Is Intuitive Surgical Stock a Steal of a Deal?

Intuitive's stock normally isn't cheap, and despite its decline this year, it's still trading at a fairly high price-to-earnings (P/E) multiple of 63. And its forward P/E, which factors in analyst projections of future earnings, is also high at nearly 50.

While it may not seem like a bargain right now (it is, after all, up around 700% in 10 years), the stock can still be an excellent investment in the long run, given the growth potential it possesses. It'll require patience, but if you're looking for a stock to hold for 10-plus years, Intuitive can make for a great investment to put in your portfolio for the long haul. Investors should also consider the risks associated with technological innovation, such as potential competition from other companies, regulatory changes, and challenges related to widespread adoption of new technologies. Additionally, it's important to conduct thorough research on the company's financial health, understand its business model, and assess its future growth potential before making any investment decisions.