Will Intuitive Surgical Ever Pay A Dividend?

Intuitive is on pace for $4.3 billion in revenue this year, which would be down from $4.5 billion in 2019. However, investors shouldn’t take this as anything other than an indication that COVID-19 disrupted procedures around the world, and beginning in 2021, we believe the company will be right back on track.

Growth Prospects

Despite its large size, Intuitive Surgical has an immense amount of growth potential in front of it. The installed base of da Vinci machines has grown at double-digit rates for years, including a 12% gain in 2019. In addition, the number of procedures the machine can do is expanding, meaning that customers are finding greater utility in the machine.

This has led to more procedures per machine, as well as existing customers purchasing additional machines.

Source: Investor presentation

Da Vinci machines cost between $0.5 million and $2.5 million to purchase, depending upon configuration, which generated about $1.3 billion in total revenue last year. Those are one-time purchases for the customer, but it opens the door to significant recurring revenue for Intuitive Surgical as the machine is used in procedures subsequent to purchase.

The lucrative recurring revenue is what is helping to drive Intuitive Surgical’s growth, as a higher installed base of machines means a higher level of recurring revenue, which comes from servicing revenue, as well as accessories and peripherals that are used up during a procedure. Indeed, recurring revenue was 72% in 2019, which is extremely attractive from an investor’s perspective.

Source: Investor presentation

Intuitive Surgical isn’t resting on its laurels, however. The company continues to use the cash it generates to invest in future growth, including improving its core da Vinci system, but also in creating new products that serve related needs.

Above is just a sampling of the growth initiatives the company is working on, and while none of these is likely to ever reach anything like the success of da Vinci, diversifying away from a core product is always a good idea. We believe that Intuitive Surgical’s growth runway in the coming years is enormous, and project revenue growth in the low-double-digits annually, with earnings-per-share growth closer to 20%.

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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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