Key insights
- Procept Biorobotics (PRCT) shows strong revenue growth and expanding gross margins, outperforming Intuitive Surgical (ISRG) at a similar stage. Despite a recent revenue guidance cut, PRCT's 2027 outlook is robust, suggesting significant upside potential if it executes similarly to ISRG. The stock trades at a lower multiple, offering potential for expansion and substantial price appreciation over the next three years.
I had never heard of this company until last week. Procept Biorobotics is a surgical robot company. Revenues have quadrupled since 2022. Gross margin has expanded with revenues which demonstrates true economies of scale.
It is very hard to really predict how a young company like this will perform. What I did is go back to ISRG and look at how that company executed from the same revenue base PRCT has today.
Halfway through 2006, ISRG crossed the $300mm revenue threshold that PRCT hit last year. ISRG had the same gross margin then as PRCT has today. ISRG had almost $600mm of capital on the balance sheet then. PRCT has $450mm of capital today.
ISRG was traded at 9-18x sales (very rocky period for ISRG stock price). PRCT trades at 4.5x sales.
All of these data points are incredibly encouraging. PRCT is growing faster than ISRG at the same stage of existence and trading at a lower multiple. IF PRCT can execute similar to ISRG, the potential for multiple expansion is significant. Combine a price/sale multiple doubling with 30% revenue growth and the stock can rise 150% over 3 years without blinking.
The only red flag is that Procept guided revenue down against expectations (still up 30%) for this year. However, the revenue guidance for 2027 is explosive. Analysts do not believe it. That leaves a huge upside surprise on the table. If the analysts end up being right, there is still 25% revenue growth. It is unlikely for the price/sales multiple to de-rate much more without some disaster (which is always possible).