Today we're going to take a look at the well-established Intuitive Surgical, Inc. (NASDAQ:ISRG). The company's stock saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$819 and falling to the lows of US$685. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Intuitive Surgical's current trading price of US$685 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Intuitive Surgical’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Intuitive Surgical still cheap?
According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Intuitive Surgical’s ratio of 75.55x is above its peer average of 47.66x, which suggests the stock is trading at a higher price compared to the Medical Equipment industry. But, is there another opportunity to buy low in the future? Given that Intuitive Surgical’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Intuitive Surgical look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 49% over the next couple of years, the future seems bright for Intuitive Surgical. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in ISRG’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe ISRG should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on ISRG for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for ISRG, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
It can be quite valuable to consider what analysts expect for Intuitive Surgical from their most recent forecasts. So feel free to check out our free graph representing analyst forecasts.
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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. 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.
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