Peers
Market Cap ($bn) P/E Ratio Dividend Yield (%) Net Debt/EBITDA
ROE (%)
Operating Income Margin (%)
INTUITIVE SURGICAL INC
142,4
80,73
0
-2,32
15,16
34,92
STRYKER CORP MEDTRONIC PLC ABBOTT LABORATORIES Average Median
117,4 98 167,4 131,3 129,9
32,83 31,65 29,76 43,7 32,2
0,97 1,95 1,49 1,1 1,2
2,8 2,08 0,87 0,9 1,5
22,73 10,48 21,5 17,5 18,3
17,05 10,75 13,62 19,1 15,3
Source: Bloomberg
On Return on Equity, the company presents a lower value than the industry median, however, this is due to the large amount of capital that the technologies request in order to generate profits. On average, we can observe that, even though the large amounts of R&D requested, the industry is being able to manage efficiently equity capital. On the opposite side, Intuitive has the highest operating margin (34.92), way above its industry median of 15.3. The only player in the medical market which has a higher Operating margin is Hologic, a company that provides image solutions (not mentioned on the table), all the remaining peers seem to have lower profitability than Intuitive, hasten to add that it can be explained by the monopoly the company has established on the specific patent they own, targeting their prices disregarding the rest of the market. Overall, despite the high price of the stock and after a DCF model, we reached the conclusion that the company is around 4% undervalued. Intuitive is undoubtedly performing extremely well in relation to its peers and since we project an 8% annual increase on earnings, we see some available space for extra gains. Once taking a value investing approach, we can identify a company that is being able to explore new trends and technologies by itself without compromising their results, Intuitive is indeed generating cash-flows, even during times when the demand for these services falls. We strongly believe that the high-grow potential that minimally invasive surgery has (expected to grow 100% in the next five years), allied with the unique technology the company develops, can build up a trend around Intuitive, creating even better results and good returns to its shareholders.
Outlook Intuitive Surgical, a 26-year-old company, is already the main leader regarding Minimally Invasive
Surgeries and is in a sector with potential development, especially if reaches the possibility of reducing costs overall. The success of the company has emerged majorly through the sales of the Da Vinci, a product that besides performing MIS (Minimally Invasive Surgery), has also complement goods along with them, which has forced users to purchase accessories and inventories to Intuitive Surgical. The company performing in the healthcare sector, has set for throughout the year almost the same business model and strategy, which as resulted in growing revenues until 2019 (prepandemic year) while keeping profit margin at the same range. The company has had a positive evolution throughout the years, but as always it has some upcoming difficulties, and possible barriers to its development. The firm has identified some possible future setbacks. The company´s products are subject to a long and precise regulatory process, in which if not accepted the company is not eligible for the product selling, besides if not meeting the federal, state, or other manufacturing standards, the company might have to temporarily close operations, imports/exports, where if not passed the international legislation, it is not possible to sell abroad, and recall some products, revealing delivery delays and lost revenues. The company is always subject to federal, state, and government laws regarding the business practices, which if violated could result in penalties to the firm, in which possible investigations would cause adverse publicity, causing harm to the name of the company. Regarding hospitals, and clients, the case of the need to suspend most surgery related operations (such as during Covid-19), or even an all-out shutdown, presents a risk of finishing all possible usages of the Da Vinci robot and its accessories. With this, the company will be put to the challenge, following straight rules, and never good
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