Stocks

What Led To 60% Growth In Intuitive Surgical's Stock Over The Last Two Years?

Intuitive Surgical’s (NASDAQ:ISRG) stock price has grown around 60% over the last two years or so, led by growth in revenues and expansion of earnings multiple, partly offset by a slight decline in net income margin. In this note we discuss these factors that impacted Intuitive Surgical’s share price over the last two years. You can look at our interactive dashboard analysis ~ Why Did Intuitive Surgical’s Stock Grow >60% Over The Last Two Years? ~ for more details on the expected performance of the company. In addition, you can see more of our data for healthcare companies here.Intuitive Surgical’s Stock Price Grew 66% From $312 By The End of Q2 2017 To $520 By The End of Q2 2019, Led By Growth In Revenue, P/E Multiple Expansion, And A Decline In No. of Shares, Partly Offset By A Slight Decline In Margins. 

  • Intuitive Surgical generates its revenues primarily from three sources: instruments & accessories, systems, and services.
  • Instruments & accessories sales includes EndoWrist devices, which have tools such as forceps and scissors attached to them, in order to provide better control to surgeons. Accessories include sterile drapes, camera heads, vision products, light guides, and other devices.
  • System sales refers to da Vinci surgical systems, which are computer assisted systems that help surgeons perform minimally invasive surgeries by controlling the device from a console.
  • Services includes full-time support to its customers, from installing the surgical systems to repairing and maintaining them.

  • Intuitive Surgical’s total revenues grew from $3.1 billion in 2017 to $3.7 billion in 2018, and they will likely grow to $4.3 billion in 2019.
  • Instruments & accessories revenue grew from $1.6 billion in 2017 to $2.0 billion in 2018, and an estimated $2.3 billion in 2019. This can be attributed to the company’s growing installed base, which has been trending higher of late, and we expect this trend to continue.
  • Systems revenue grew from under $1.0 billion in 2017 to $1.1 billion in 2018, and an estimated $1.3 billion in 2019. Systems revenue growth is being led by higher demand for surgical robotic systems, given the widened scope of procedures performed. The company has guided for 15% to 17% procedure growth in 2019.
  • Services revenue grew from $573 million in 2017 to $635 million in 2018, and an estimated $706 million in 2019, led by growth in the company’s installed base.

#2. Adjusted Net Income Grew At A Slightly Slower Pace Compared To Intuitive Surgical’s Revenues, Led By Margin Contraction.

  • Intuitive Surgical’s adjusted net income grew from $1.1 billion in 2017 to $1.3 billion in 2018, and an estimated $1.4 billion in 2019.
  • This can be attributed to higher revenues, partly offset by a slight expected decline in net income margin.
  • Adjusted net income margin grew from 33.7% in 2017 to around 35.0% in 2018, and we forecast it to be 33.1% in 2019.

#2.1 Total Expenses Could Increase From $2.0 Billion In 2017 To $2.9 Billion In 2019.

  • Intuitive Surgical’s total expenses grew from $2.1 billion in 2017 to $2.4 billion in 2018, and an estimated $2.9 billion in 2019, while total expenses as % of revenue could increase slightly from 66.3% in 2017 to 66.9% in 2019.
  • COGS as % of revenue has hovered around the 30% mark in the recent past, and we expect it to remain around the same level in 2019.

  • SG&A as % of revenue grew from 25.8% in 2017 to 26.5% in 2018, and it is estimated to be around 26.3% in 2019.
  • R&D as % of revenue grew from 10.5% in 2017 to 11.2% in 2018, and it is estimated to be 11.4% in 2019.
  • Interest & Other Expenses as % of revenue declined from -1.3% in 2017 to -2.2% in 2018, and it is estimated to be around -2.3% in 2019.

  • Effective tax rate declined from 39.3% in 2017 to 12.1% in 2018, and it is estimated to be 20.5% in 2019.
  • Non-GAAP adjustments as % of revenue grew from -12.3% in 2017 to -4.8% in 2018, and it is estimated to be -5.5% in 2019.

#3. Price To Earnings Multiple For Intuitive Surgical Grew From 34.4x In 2017 To 43.3x In 2019 (End of Q2).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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