Invest Intuitively

Now for part 2 of my 4 part "battle of the growth stocks" series.

Intuitive Surgical (ISRG)

ISRG makes robots for performing surgery. The robots are controlled by a surgeon sat in the same room as the patient but the fact that all the surgery is actually performed by the robot arms allows the surgeon much more control over the incisions and makes the operations much less invasive. The benefits in terms of patient recovery time are enormous.

There are over 1400 da Vinci Surgical Systems installed worldwide. Best of all, once a system is sold ISRG get revenue from every operation as it sells the disposable parts. This recurring revenue now accounts for over 50% of total revenue and the proportion is growing.

Even in the turbulent economy of last year ISRG sold 338 systems - quite an astounding figure.

ISRG is the global leader in robot surgery. Once a hospital has invested in the system and the associated staff training it would be financially painful to then change to a competing product. This gives ISRG a very strong position.

There is no doubt that ISRG is a very attractive company. Here are the fundamentals:

Market Cap: $14 Billion

Dividend Yield: 0%

Cash: $1.2 Billion

2010 PE: 45

Predicted Growth Rate: 25% annual

There is a feeling that, in terms of the ISRG share price, the ship has already left the dock. When it was under $100 last spring the valuation was compelling but with the shares selling for $360 it hard to see ISRG as a bargain. The ship may come back to the dock at some point in the future of course but a purchase at the current price would be speculative.

So the results:

Growth Potential: 7

Risk: 8

Valuation: 4

That give ISRG a score of 19 out of 30.

Next is Amazon.