Daily Double: Intuitive Surgical

How did it double?

"Robotic arms in an operating room seem like something out of Star Trek or pre-Annie Hall Woody Allen. However, Intuitive Surgical® (Nasdaq: ISRG) is the real deal. Its da Vinci Surgical® System has taken hospitals by storm, assisting in performing minimally invasive procedures and simplifying more complicated applications.

The real beauty of watching Intuitive Surgical® over the past few quarters isn't just watching the new installations grow. It's seeing the rest of the company's business growing even faster. With instruments, accessories, maintenance, and training zooming ahead at warp speed, the hospitals that are using da Vinci are clearly using them more often. That has led to a company that has consistently blown past Wall Street's profit targets."

Business description

"Taking surgery beyond the limits of the human hand™-- that's the company's motto. Robotic prostatectomies and open heart surgeries may seem like risky maneuvers, but Intuitive Surgical®'s systems have proven to be safe for patients and lucrative for hospitals.

But surgeons aren't becoming obsolete. Instead of using their own human hands, they man the four robotic arms through a separate console and oversee the process. Perhaps the company's promotional video would help explain the process better than words.

How could you have found this double?

As Stephen Simpson pointed out when reviewing the company's stellar third-quarter results last month, shares of Intuitive Surgical® had provided investors with buying opportunities during three distinct trading dips over the past two years.

The fact that Intuitive Surgical® has a history of bouncing back and blowing analysts away should have made the entry points inviting. If not, perhaps the stock's recommendation in the April issue of Motley Fool Rule Breakers should have tipped you off. The stock has risen by more than 160 per cent since that pick went public eight months ago.

Where to from here?

No, Intuitive Surgical® isn't cheap. Then again, it may not have seemed cheap at lower levels, either, and look where we find ourselves now. With the successful market debut of iRobot (Nasdaq: IRBT) earlier this month, robotic applications are as popular as ever -and this time they're not simply the work of sci-fi.

Analysts expect Intuitive Surgical® to earn $1.69 a share this year but only $1.47 a stub come 2006. Yes, the company has been known to blow past its targets, only to leave the market setting up higher projections. Earlier this month, the company was only expected to earn $1.25 per share this year and $1.08 in profits per share next year.

Let's hope the trend continues, because while growth investors may not balk at paying 69 times this year's profits for a dynamic growth company like Intuitive Surgical®, they may think twice if a bottom line dip prices the company at nearly 80 times forward earnings.

So let that robotic arm scratch your chin and your head. You may not find a more dynamic technology story than Intuitive Surgical®, although you may find cheaper one. "

The Motley Fool
By Rick Munarriz

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