Intuitive Surgical, Inc. (ISRG): Get 25% Upside With This ‘Cyborg In The Operating Room’

The large base of installed systems provides an ongoing stream of instrument sales and service which should support the shares in the near term. Annual service agreements now account for 28% of total revenue at $343 million. With a net margin of 30%, the company could even lower its sales price to attract more purchases, which could drive instrument sales and service even higher.

A moderation in sales growth to 15% and slightly weaker margins should yield at least $16.77 per share in earnings for fiscal 2013. The five-year average price ratio for the stock is 34.3 times trailing earnings, well above the current multiple of 21.8 times. At a more realistic 28 times earnings, the shares should be worth $469 a share at the end of the current fiscal year — a 25% upside to the current price.

Risks to Consider: The company faces considerable risk from the Affordable Care Act and the general push to lower the costs of medical procedures, which could lead to greater volatility in its stock.

Action to Take –> Intuitive is changing the way surgery is done and improving outcomes for patients. The revolutionary technology has little to fear from Washington, and investors should consider Intuitive Surgical, Inc. (NASDAQ:ISRG) while it’s still cheap.

P.S. — If you think 25% upside on Intuitive Surgical, Inc. (NASDAQ:ISRG) sounds good, you’ll want to take a look at our latest report, “The 11 Most Shocking Investment Predictions For 2014.” Our previous predictions have given investors 89%… 92%… 293%… and even 310% gains in a year. Click here to learn more.

– Joseph Hogue

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