Intuitive Surgical, Inc. (ISRG): Do Not Confuse a Great Company With a Great Invesment

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Company Ticker Price /Fair Value ForwardPE PEGratio PEGPayback
Intuitive Surgical Inc ISRG $ 575/ 343= 165% 26.5x 1.2x 8.8 yrs
Baxter International BAX $ 67 / 65= 105% 12.8x 1.4x 7.8 yrs
Covidien plc COV $ 62 / 76= 80% 12.1x 1.6x 7.8 yrs
Varian Medical Systems VAR $ 70 / 84=80% 14.5x 1.3x 8.1 yrs
Medtronic Inc MDT $ 46 / 48= 95% 11.7x 2.7x 8.7 yrs
GE GE $ 22 / 25= 85% 11.4x 1.1x 6.9 yrs

(*) Fair Value using Morninstar estimates.

Conclusion

As Warren Buffett famously said on the rules for investing: Rule #1: Never lose money. Rule #2: Never forget Rule #1.  Always have a “margin of safety.”

ISRG is market leader with a wide economic moat in an attractive industry allowing growth while preserving pricing power – with healthy free cash flows and strong RoIC. Analysts expect 20% growth over the next 5 years.

But the valuation is very steep and does not allow for (a.) strong protection against downside risk, nor (b.) a good chance at earning high returns

Investment 101: Avoid the mistake of confusing a great company with a great investment – the two can be very different.

The article Do Not Confuse a Great Company With a Great Invesment originally appeared on Fool.com and is written by Rohit Gupta.

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