Intuitive Surgical's (NASDAQ:ISRG) 23% CAGR outpaced the company's earnings growth over the same five-year period

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. One great example is Intuitive Surgical, Inc. (NASDAQ:ISRG) which saw its share price drive 177% higher over five years. On top of that, the share price is up 14% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 7.8% in 90 days).

Since the stock has added US$7.2b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Intuitive Surgical

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, Intuitive Surgical managed to grow its earnings per share at 11% a year. This EPS growth is lower than the 23% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 87.00.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Intuitive Surgical has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

We're pleased to report that Intuitive Surgical shareholders have received a total shareholder return of 72% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 23% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Is Intuitive Surgical cheap compared to other companies? These 3 valuation measures might help you decide.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.