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Intuitive Gains in Robotic Surgery
09/28/2016 7:00 am EST
Almost singlehandedly, this California-based has launched a revolution that is changing the way surgery is performed throughout the world, notes Nicholas Vardy, editor of The Global Guru.
Intuitive Surgical (ISRG) – founded in 1995 -- designs, manufactures and markets surgical robotic-assisted systems.
With more than 3,700 of its flagship da Vinci Surgical System in hospitals worldwide, it is the global leader in the robotic surgery field.
The majority of top US hospitals have invested in robotic surgery equipment and train their new doctors in the use of da Vinci as a matter of course.
As a general rule, any new technology attracts a swarm of new entrants and competitors. But Intuitive’s installed base of 3,745 da Vinci systems worldwide is a formidable barrier to entry — very wide “moat.”
Plus, da Vinci is more than just a robotic system. It is an entire ecosystem of instruments and accessories, training technologies, analytic support, service offerings and program optimization.
Any new competitor to Intuitive would not only have to replicate this entire ecosystem of products and services but also completely re-train hospital staff already familiar with the da Vinci system.
This diverse ecosystem also ensures different sources of growth. Intuitive generates income by selling da Vinci systems, providing instruments and accessories and training surgeons in its use.
With all of the products and services that surround da Vinci’s systems, recurring revenue comprises 75% of total company revenue.
That means the company’s revenue and the business model becomes more robust with each passing quarter as the installed base of da Vinci systems grows.
Intuitive has plenty of room to grow its market by expanding in Europe and Asia, where the da Vinci installed base is less than half that in the United States.
Moreover, with $4.2 billion on its balance sheet, Intuitive shareholders may soon benefit from stock buybacks and dividends in the future.
Trading at a forward P/E ratio of 28, Intuitive Surgical’s stock is not cheap. Moreover, shares of Intuitive are already up more than 25% year to date. Still, I believe there is plenty of upside left.
By Nicholas Vardy, Editor of The Global Guru
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