Intuitive Surgical Stock (ISRG): A premium quality market leader with ample growth runway

intuitive surgery (Nasdaq:ISRG) has enjoyed years of strong growth but there is still plenty of room for further expansion in revenue and earnings. Competition is on the rise, but in the long term, the market is likely to hold together and intuitively, with its strong financial resources, strong path The record is being set to remain among the last standing.

brief overview

Intuitive Surgical is the world’s leading surgical robot maker with a market share of approx 80% all over the world. The Company’s product portfolio largely consists of two principal products – (1) Da Vinci Robotic Surgical System (used for minimally invasive surgeries including general surgery such as hernia repair, colorectal surgery, and cholecystectomy, and urological procedures such as prostatectomy, partial nephrectomy, and gynecological surgeries such as hysterectomies, colectomies, cardiac surgeries, and head and neck specialties) and (2) the ionic robot-assisted bronchoscopy system used for minimally invasive lung biopsies.

In the surgical robot space, Intuitive Surgical’s Da Vinci platform Compete Against players like Medtronic (with Hugo surgical robot platform) (MDT), Johnson & Johnson (with its Ottava platform) (JNJ), Asensus Surgical (Senhance) (ASXC), and CMR Surgical (with Versius), while in the robot-assisted bronchoscopy space, Intuitive Surgical’s Ion Endoluminal System competes against Johnson & Johnson’s Monarch.

For the fiscal year ending December 2021, Intuitive Surgical generated revenue from 5.7 billion US dollars (up 31% YoY), total profit of $3.9 billion (up 38% YoY), net profit of $1.7 billion (up 60% YoY). Product revenue (which includes revenue generated from sales of systems, tools and accessories) accounted for 82% of revenue while service sales (revenue from system maintenance services) accounted for the remainder. The majority of revenue is generated in the United States

I look forward…

More room for penetration of the robotic surgery system both in the United States and internationally

Laparoscopy is one of the most common methods of non-robotic minimally invasive surgery, but robotic surgery (which is generally more expensive than laparoscopy) is gaining more and more popularity. a study Of the general surgery procedures both open surgery and laparoscopy were found to have decreased while robotic surgery increased, a trend seen in other specific surgeries as well as a significant increase in some procedures.

There is still plenty of room for growth. Approximately 1.6 million procedures have been performed worldwide using da Vinci systems in 2021. Da Vinci is currently the most popular robotic surgery platform, so the total number of robot-assisted surgical procedures performed worldwide is likely not to exceed that much.

In comparison, currently more than 13 million Laparoscopy is performed worldwide annually by approx Third of that (or more than 4 million) were performed in the US – Intuitive’s largest market which is about 61% of its installed systems base of 6,730 units at the end of December 2021. These numbers indicate that Intuitive Surgical performed less than 1 million procedures Robotic surgery in the US Although it is unclear if robotic surgery will completely replace laparoscopy, it does indicate an untapped market for system sales that may be two to three times larger in the US alone at current system usage rates. Assuming a market share decline of about 60% and not factoring in any price increases (with competition heating up especially from Medtronic, Intuitive may play the long game and cap system price increases that currently range from $0.5M to $2.5M per system), no There is still some significant revenue potential from system sales in the US alone.

The biggest opportunity is likely to be outside the US where Intuitive has seen good momentum (US revenue share decreased from 70% of total revenue in 2019 to 67% of total revenue in 2021). Fewer than 1 million da Vinci procedures were performed internationally in 2021 compared to an estimated 8 million laparoscopy procedures performed annually worldwide. Again, robotic surgery may not completely replace arthroscopic procedures, but until then, the untapped market is massive indicating huge multi-billion dollar revenue potential even after reduced market share and limited price increases are factored in. By combining both in the US and outside the US, Intuitive Surgical could achieve a twofold or triple increase in total sales of the systems, amounting to several billion dollars in the coming years even without any price increase.

Increased tool and accessories revenue and service revenue on the back of the growing system installation base

Intuitive Surgical generally earns between $600 and $3,500 in instrument and accessory revenue per surgical procedure performed (as of 2021), down slightly from $700 to $3,500 in 2019 in part as a result of efforts to reduce instrument costs Through Intuitive’s Extended Usage Program, which the company says generates cost savings of approx 9%-15% for clients. The price decline had no impact on this revenue stream. Continued procedure adoption and a growing proven base were strong growth drivers for Tools & Accessories revenue of $3.1 billion in 2021 from $2.46 billion during a pandemic-hit 2020 and $2.41 billion in 2020. billion in 2019. Looking ahead, the explosive growth in Intuitive’s global installed base in the coming years will likely outweigh any pricing pressures.

Badih generated $916 million in service revenue in 2021, up from $724 million in 2020 and 2019, an increase driven by its growing install base. Intuitive earns $80,000 to $190,000 per year on service fees per system and additional growth in their installed systems base could drive this revenue stream in the coming years.

With so many drivers driving earnings growth, earnings are expected to increase as well, preventing any unexpected costs like litigation and so on. 30% over the past few years.

Ion Endoluminal is likely to remain a small revenue stream but has good growth prospects

The Ion Endoluminal System from Intuitive has been approved by the FDA only in 2019, currently has little impact on revenue and earnings. Looking into the future, Ion Endoluminal will likely remain a small part of Intuitive’s revenue mix but in absolute terms, the product’s revenue potential is nothing to sneeze at. in about $600,000 USDThe Ion Endoluminal System from Intuitive sells for significantly less than the Da Vinci System but with only 129 systems in total currently installed, there is a long path for growth; Approximately 500,000 bronchoscopies are performed each year, and only a fraction of these are likely to be performed with robot assistance (in 2019, rival Monarch announced a major milestone in 1,000 Bronchoscopy procedures performed since the platform obtained authorization in 2018).

Risks

competition in the medium term

Competition from players like Medtronic, J&J, and Zimmer Biomet is expected to increase, which could limit Intuitive’s pricing power and potential margins as well. Like the Da Vinci Intuitive System, Medtronic’s Hugo appears to be a very competitive system in urological and gynecological procedures, but Medtronic is all about 20% to 25% Cheaper than Da Vinci Intuitive, which positions the platform better to attract cost-conscious customers around the world. Meanwhile, the Asensus Surgical Senhance platform differentiates itself through haptic feedback and has been gaining traction Japan.

conclusion

The robot-assisted surgical robotics market has tremendous room to grow and market leader Intuitive Surgical is positioned to tap into the multi-billion dollar revenue potential. However, competition is increasing, which may lead to medium-term margin pressure and market share erosion.

However, in the long run, cost constraints related to platform learning curves and surgeon training programs may consolidate the industry, limiting the market to a handful of the most competitive and intuitive players as the market leader with a product with years of proven reliability and financially likely to be one of the The strongest players among the best are in a position to capture untapped market share and be among the last players standing. AP/E for nearly 60 years may be seen as too expensive for some, but others may view it as fair to a financially strong, long-term market leader in a growing industry with high conversion costs and high barriers to entry.

The last fiscal year	intuitive	Medtronic	J&J	Zimmer (ZBH)	census
Total debt to equity	0	51%	43%	48%	5%
cash balance – American dollar	4.2 billion	10.6	31.6	495 million	98 million
net margins %	29.8%	15.9%	22.3%	5%	(759%)
P/E	57.2	15.3	18	18.4	–

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Analysts It is split between buy and hold.

Editor’s note: This article covers one or more smaller cap stocks. Please be aware of the risks associated with these stocks.