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Intuitive Surgical, Inc. (NASDAQ:ISRG) is considered a high-growth stock, but its last closing price of $533.05 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.
What can we expect from Intuitive Surgical in the future?
According to the analysts covering the company, the following few years should bring about good growth prospects for Intuitive Surgical. Expectations from 19 analysts are buoyant with earnings forecasted to rise significantly from today’s level of $10.038 to $12.624 over the next three years. On average, this leads to a growth rate of 11% each year, which signals a market-beating outlook in the upcoming years.
Is ISRG available at a good price after accounting for its growth?
Intuitive Surgical is looking rather expensive based on its price-to-earnings (PE) ratio of 53.11x. This illustrates that Intuitive Surgical is overvalued compared to the US market average ratio of 18x , and overvalued based on current earnings compared to the Medical Equipment industry average of 41.6x .
We already know that ISRG appears to be overvalued when compared to its industry average. However, since Intuitive Surgical is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 53.11x and expected year-on-year earnings growth of 11% give Intuitive Surgical a quite high PEG ratio of 4.85x. This tells us that when we include its growth in our analysis Intuitive Surgical’s stock can be considered overvalued , based on its fundamentals.
What this means for you:
ISRG’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
- Financial Health: Are ISRG’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has ISRG been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of ISRG’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.