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ISRG – Market expectations are for Uniform ROA to rebound, but management may have concerns about procedural growth, clinical trials, and extended use instruments

August 31, 2021

  • Intuitive Surgical, Inc. (ISRG:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 64.4x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about procedural growth, clinical trial progress, and their extended use instruments.
  • Specifically, management may lack confidence in their ability to sustain procedural growth rate improvements, maintain strong Da Vinci capacity utilization, and finalize leasing and alternative financing arrangements for customers. Additionally, they may be concerned about the pandemic’s impact on their clinical trial programs, the benefit of their extended use instruments, and supply chain headwinds. Also, management may be downplaying concerns about the potential negative per-unit revenue impact of customer purchasing patterns reflecting the extended use program, and they may be overstating patient confidence. Furthermore, they may have concerns about the utility of their My Intuitive app, the quality of their solutions for Bariatrics procedures, and the pace of their R&D spending recovery. Finally, they may be downplaying concerns about resurgent COVID-19 hospitalizations putting further pressure on their business.