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5 Stocks I’d Willingly Pay a Premium For:, Inc. (AMZN), Dunkin Brands Group Inc (DNKN)

Yesterday, I broke out my handy-dandy valuation metric known as TMFULOI and, utilizing the Motley Fool CAPS Screener as well as data from Morningstar and Yahoo! Finance, concluded which five companies out of a pool of nearly 5,000 are the most overvalued in the market.

Today, I’m not using any specific calculations or screeners. Instead, I want to share five companies that boast significant valuation premiums relative to the S&P 500 that I’d gladly pay a premium for. Traditionally, I love deep-value investments, but I consider the tangible and intangible aspects of these five companies more than worthwhile enough to support their lofty valuations.

Intuitive Surgical, Inc. (NASDAQ:ISRG)Intuitive Surgical, Inc. (NASDAQ:ISRG)
What makes Intuitive Surgical so dominant is the simple fact that there are no other profitable soft-tissue robotic surgery competitors. Period! Until the time comes when there are, its da Vinci surgical systems will continue to command top dollar. In addition, Intuitive has such a gigantic head start when it comes to training physicians on how to use its robotic surgical equipment that I project it’ll see double-digit procedure growth through the remainder of the decade, even if one of its competitors gets its act together.

Two months ago, noted short-selling specialist Citron Research listed five bullet points explaining why Intuitive’s premium may not be justified, but Intuitive’s latest earnings report rapidly cast doubt on Citron’s thesis. With a 15th consecutive earnings beat under its belt and management projecting procedure growth of 20% to 23%, I would gladly pay 10.5 sales and 32 times 2013’s profit estimates for Intuitive Surgical.

Lumber Liquidators Holdings Inc (NYSE:LL)
There’s a very good reason that Lumber Liquidators’ CEO, Robert Lynch, was voted the “CEO of the Year” by the Motley Fool community in 2012: He’s been proactive, not reactive, with his advertising and product line.

Since becoming CEO on Jan. 1, 2012, Lynch has expanded the company’s advertising campaign to target even those individuals looking to hire a professional to install their flooring instead of just traditionally targeting do-it-yourself homeowners. Lynch’s other strategies, which include streamlining its product development and logistics, as well as focusing on the value of its flooring offerings, have resulted in double-digit same-store sales increases. Lumber Liquidators, which is set to report today (Feb. 20), stands to benefit from homeowners looking to remodel their own homes, from new home construction, and from record-low interest rates, which are spurring home improvements. Lumber Liquidators isn’t cheap at nearly eight times book value and 31 times forward earnings, but it’s a small price to pay for a truly fantastic management team.

Palo Alto Networks Inc (NYSE:PANW)
With recent cyber-attacks on government websites coming to light, the need for higher-quality cybersecurity software is no longer optional — it’s mandatory. An executive order signed by President Obama last week to set cybersecurity standards in the U.S. could mean even faster growth for Palo Alto Networks. Unlike traditional security companies such as Cisco Systems, Inc. (NASDAQ:CSCO) and Juniper Networks, Inc. (NYSE:JNPR), which build their security software directly into their hardware, Palo Alto’s software is geared toward the cloud with nearly all upgrades being accomplished on Palo Alto’s end. This means ease of use for its customers and plenty of recurring revenue for Palo Alto.

In its first-quarter results, reported in December, Palo Alto reported sales growth of 50% and also announced the launch of a new next-generation firewall platform in collaboration with VMware, Inc. (NYSE:VMW), a virtualization company that’s also caught my attention recently. With $342 million in cash, a phenomenal growth rate, and disruptive technology, even a forward P/E of 128 couldn’t keep me from suggesting a deeper dive into Palo Alto Networks.

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