Key insights
- An analyst views Intuitive Surgical (ISRG) as reasonably valued after recent earnings and guidance, citing strong FCF growth exceeding stock price appreciation since 2022 lows. They highlight a 1.7% FCF yield with 20% topline and ~25% EBITDA/EPS growth. The analyst sees potential upside but seeks input from long-term ISRG investors regarding catalysts and optimal entry points, with a potential support level around $440.
Not your average value investing name but the reason why I even mention it is the med tech sector has been beaten down so much this year from various headwinds including Covid cliff for diagnostics.
For ISRG itself, it’s been trading at lowest mults in years recently. Following the recent impressive earnings beat and good guidance which rallied the stock 8%.
I actually don’t hate the valuation too much now. It’s not cheap but reasonable for its growth profile. This means the risk reward is there but I could be risking myself to catch a falling knife here.
This is the numbers which I like: 1.7% fcf yield for a 170 billion market cap company growing topline at 20% and ebitda/eps both at around ~25% ttm. Since q1 2025, the fcf growth each quarter has been 50%+ with the most recent q1 fcf growing 74%.
And if we compare the trough in 2022 vs now. The stock price is up roughly 250% vs. fcf growth in the same period of roughly (2022 annual comparing with TTM) of 295%. And I am talking about the lowest bottom of 2022 where people are pricing in the worst to happen - the fundamentals now are much better but the stock price growth still underperformed the fcf growth for the same period - even when compared to the actual bottom in the last 5 years. So I see this as my margin of safety.
Can it go lower, possibly. If you are a chart reader the bigger support is probably at around $440 a share where fcf yield is closer to 1.85%. But it certainly looks attractive to me.
The only thing is, I want to hear from investors who followed this name for a long time. What do you think about my analysis? At what price would you go all in? Are there any short term/medium term catalyst that might excite you?