PODD is ISRG’s peer in Health Care Equipment industry that has:
1) Lower valuation (P/EBIT) compared to ISRG
2) But higher revenue and operating income growth
This disconnect between valuation and performance could mean that you are better off buying PODD stock vs. ISRG
Key Metrics Compared
| Metric | ISRG | PODD |
|---|---|---|
| P/OpInc* | 74.6x | 59.4x |
| LTM OpInc Growth | 32.9% | 36.8% |
| 3Y Avg OpInc Growth | 12.5% | 254.9% |
| LTM Revenue Growth | 19.1% | 23.5% |
| 3Y Avg Revenue Growth | 13.9% | 24.5% |
OpInc = Operating Income, P/EBIT = Price To Operating Income Ratio
This is just one approach to evaluate investments. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
Is The Mismatch In Stock Price Temporary
One way to check if Intuitive Surgical stock is expensive now versus the other tickers would be to see how these metrics compared across companies exactly a year ago. Specifically, if there has been a marked reversal in the trend for Intuitive Surgical in the last 12 months, then there is a chance that the current mismatch is likely to reverse. On the other hand, a persistent underperformance in revenue and operating income growth for Intuitive Surgical would reinforce the conclusion that the stock is expensive compared to its peers, but may not revert soon
Key Metrics Compared 1 Yr Prior
| Metric | ISRG | PODD |
|---|---|---|
| P/OpInc* | 69x | 44.3x |
| LTM OpInc Growth | 32.9% | 40.4% |
| 3Y Avg OpInc Growth | 10.5% | 151.8% |
| LTM Revenue Growth | 17.2% | 22.1% |
| 3Y Avg Revenue Growth | 13.6% | 23.6% |
OpInc = Operating Income
Additional Metrics To Consider
| Metric | ISRG | PODD |
|---|---|---|
| P/S | 21.0x | 9.2x |
| Market Cap (Current) | $ 183.3 Bil | $ 20.3 Bil |
| LTM Revenue | $ 8.71 Bil | $ 2.20 Bil |
| LTM Opinc | $ 2.46 Bil | $ 340.80 Mil |
| LTM Op Margin | 28.2% | 15.5% |
OpInc = Operating Income
Alternate buying based on valuation, while attractive, needs to be evaluated carefully from multiple angles. Such multi-factor analysis is exactly how we construct Trefis portfolio strategies. If you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
