Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

The Junk Pile

Is Intuitive Surgical (ISRG) Making Money?

Intuitive Surgical (ISRG) is leading today’s biotechnology bubble. In fact, Mr. Market paid $867.55 for Intuitive Surgical on 3 May 2021.

Over the past year, Intuitive’s price rose from $498.86 on 1 May 2020. Thus, Intuitive Surgical Inc. (NASDAQ: ISRG)went from overpriced to grossly priced in a year. So what is Intuitive Surgical, and why does Mr. Market love it?

Intuitive is the leading manufacturer of surgical robots. Intuitive claims surgeons used its da Vinci surgical system in 8.5 million procedures in 67 countries. However, the da Vinci system has a questionable history.

The da Vinci Robot’s Questionable History

Over 100 lawsuits claim da Vinci robots injured people by 2018, Drugwatch estimates. In a 2018 annual report, Intuitive admitted facing 98 da Vinic lawsuits. The suits claim da Vinci caused injuries, such electrical burns, that led to death and organ damage in patients.

In 2014, Intuitive settled around 3,000 da Vinci claims, Drugwatch alleges. The company replaced two defective da Vinci parts the Monopolar Curved Scissors and instrument covers because of the lawsuits.

Similarly, in 2018 Administrative Science Quarterly alleged they did not properly train many doctors in the surgical robots’ use. Instead, many surgeons receive informal training through what writer Matthew Beane labels “Shadow Learning.” In Shadow Learning, surgeons watch other doctors use the da Vinci then try to use it.

Hence, the da Vinci system could have serious problems, Intuitive (ISRG) has not solved. So what do investors see in ISRG?

I suspect investors think Intuitive’s technology has enormous potential value. For example, they could use the da Vinci technology for manufacturing, exploration, construction, or auto repair. Other investors think Intuitive could make the da Vinci cheap, safe, and effective.

Does Intuitive Surgical make money?

However, Intuitive Surgical (NASDAQ: ISRG) makes money. Importantly, Intuitive made money during the pandemic year of March 2020 through March 2021.

For example, Intuitive reported a quarterly operating income of $416.80 million on 31 March 2021. In addition, Intuitive reported a quarterly gross profit of $900 million on 31 March 2021.

Notably, the quarterly operating income rose from $283 million on 31 March 2020. In comparison, the quarterly gross profit grew from $735 million on 31 March 2020.

Intuitive Surgical is a growing company. Its quarterly revenues rose from $1.1 billion on 31 March 2020 to $1.292 billion on 31 March 2021.

Stockrow estimates Intuitive Surgical’s revenues grew by 17.45% in the quarter ending on 31 March 2021. Comparatively, Intuitive’s revenues fell by -22.47% in the quarter ending on 30 June 2020.

How Much Cash does Intuitive Surgical Generate?

Intuitive Surgical (ISRG) generates some cash. For instance, the company reported a quarterly operating cash flow of $477.60 million on 31 March 2021.

Plus, Intuitive reported a quarterly ending cash flow of $1.417 billion on 31 March 2021. The quarterly operating cash flow rose from $352.80 million on 31 March 2020 and the quarterly ending cash flow rose from $1.239 billion on 31 March 2020.

On the positive side, Intuitive does not borrow much money. Intuitive reported quarterly financing cash flows of $47.6 million and $85.2 million on 30 June 2020 and 30 September 2020. The quarterly financing cash flow fell to -$39.80 million on 31 December 2020 and -$102.3 million on 31 March 2021.

Impressively, Intuitive Surgical reported no long-term debt on 31 March 2021. That makes Intuitive Surgical an attractive but overpriced company.

What Value Does Intuitive Surgical (ISRG) have?

I think Intuitive Surgical (ISRG) has some strong value investment characteristics.

For instance, Intuitive had $4.588 billion in cash and short-term investments on 31 March 2021. The cash and short-term investments grew from $3.253 billion on 31 March 2020.

Moreover, Intuitive Surgical had $9.891 billion in total assets on 31 March 2020. The total assets grew to $11.54 billion on 31 March 2021. Thus, Intuitive has value and that value is growing.

On the other hand, I see nothing in Intuitive Surgical’s financials that justifies the $867.55 share price. I consider Intuitive Surgical a great stock that Mr. Market astronomically overprices.

I advise investors to and speculators to say far away from Intuitive Surgical Inc. (NASDAQ: ISRG) because I think the company’s share price will take a dramatic fall. In the final analysis, all Intuitive Surgical proves is that medical technology stocks are in a dangerous bubble.