May 12, 2013 in Business

Intuitive Surgical’s potential hints at more reward than risk

Universal Uclick
 

If you’re in the market for a higher-risk, higher-possible-gain stock, consider Intuitive Surgical (Nasdaq: ISRG), which makes robotic surgical equipment, permitting doctors to perform a variety of procedures in less-invasive ways. Its stock has averaged annual gains of more than 40 percent over the past decade, but has slid more than 15 percent over the past year.

The drop is partly due to questions being raised about its machines’ efficacy – via some lawsuits and an FDA investigation. Still, some see the company’s potential outweighing its risks.

The potential is great, as more hospitals buy robots – and then keep buying accessories and supplies needed for each procedure along with service contracts for the machines. That’s welcome, repeating revenue on top of a typical sales price of more than a million dollars apiece for Intuitive’s da Vinci robots.

Meanwhile, the number of procedures performed increased by 18 percent last quarter, over year-ago levels, and revenue and earnings have been growing by more than 20 percent annually, on average, over the past five years.

Intuitive Surgical can also grow through new procedures such as gallbladder removals, and also via international sales. Its stock seems reasonably or attractively priced, too, given its growth rates. (The Motley Fool’s newsletter services have recommended shares of Intuitive Surgical.)

Ask the Fool

Q: Should I save or spend money to help the economy? – E.A., Holden, Mass.

A: The economy does benefit when spending rises, as the demand for products and services increases, helping companies prosper and grow. But it can also benefit from increased national savings because more money in banks means more money is available to be loaned out.

So focus on taking care of yourself instead of worrying about the nation. Think of your retirement savings and investments, and be sure you have three to 12 months’ worth of living expenses saved in an emergency fund, too.

My dumbest investment

Some years ago, I bought 100 shares of a company after analyzing its earnings and other financial data. It rose quickly and I bought more shares. Later, upon returning from a vacation, I saw that it had fallen sharply.

I later learned that the company had overstated its earnings and discovered that the stock’s ticker symbol had an “E” appended to it. Is that for extinct, eliminated, exit or Ebola? – W.Z., Hartford, Conn.

The Fool responds: An “E” is a red flag, but not necessarily an Ebola-level emergency. When a company listed on the Nasdaq stock market is delinquent in filing one or more required reports with the Securities and Exchange Commission (SEC), it gets an “E” tacked to the end of its symbol. In such cases, dig deeper to get a sense of whether there’s a temporary or permanent problem.

A bigger red flag is a “Q” suffix, which means the company is involved in bankruptcy proceedings. This is almost always very bad news for investors, since companies emerging from bankruptcy protection have typically been reorganized, with their previous stock shares essentially canceled and worthless.


Thoughts and opinions on this story? Click here to comment >>

Get stories like this in a free daily email