Intuitive Surgical (ISRG) is back in focus after Mairs & Power Growth Fund added the company to its portfolio, highlighting its large da Vinci installed base, recurring consumables revenue, and increasing use of artificial intelligence.
See our latest analysis for Intuitive Surgical.
Despite a 20.2% decline in the 90 day share price return and a 19.6% drop year to date to US$452.07, longer term total shareholder returns of 76.0% over three years and 72.9% over five years suggest momentum has cooled recently after a strong multi year run.
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So, with short-term returns cooling while revenue, earnings, and recurring cash flows remain sizable, is Intuitive Surgical now trading below what its fundamentals suggest? Or is the market already pricing in the next wave of growth?
Most Popular Narrative: 15.1% Undervalued
Compared to the last close at $452.07, the most followed narrative for Intuitive Surgical points to a higher fair value of $532.46, built on detailed revenue, margin, and return assumptions.
Over the next 5 years I calculate with (actual values from 18.01.26, price/shr at 533 USD): Revenue Growth p.a.: 12% (Currently at 14,7%), we saw the peak of revenue growth with nearly 15%, now even 12% is sporty, but with the “abo like” revenues from spare parts and software licences, based on a still growing bases of installed systems, realistic. Profit Margin: 30% (currently at 28,6%), because spare parts in general have more margin than system sales, and the sales out of spare parts is still growing. Future PE: 50 (currently at 69), the high PEs are typical for fast growers, but over time the PE will go down. I see for next 5 years 50, in 10 years it could come down to 40. Interest rate: 6,77% (same as current). Which leads to an FV of 533 USD, means ISRG trades with 0,5% at fair value.
Want to see what sits behind that fair value label, according to Tokyo? The heart of this narrative is a specific mix of growth, profitability, and a future earnings multiple that is more commonly associated with premium names. Curious which assumptions pull the calculated value above today’s share price and how the projected returns compare with a simple hurdle rate? The full narrative lays out the numbers and joins them into one clear valuation story.
Result: Fair Value of $532.46 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, this hinges on continued procedure volumes and hospital capital spending, which could soften, and on P/E expectations that may compress more quickly than Tokyo assumes.
Find out about the key risks to this Intuitive Surgical narrative.
Another View: Market Multiple Sends a Different Signal
The user narrative points to a fair value of $532.46, yet the current P/E of 56.2x tells a more cautious story. That P/E sits well above the US Medical Equipment industry at 26.6x, the peer average at 30.7x, and even the fair ratio of 35.1x, which is a level the market could move towards over time.
For you as a shareholder, that gap means a lot of future growth is already embedded in the price, so any disappointment in earnings or sentiment could have an outsized impact. The question is whether you are comfortable paying such a premium while other investors debate which fair value anchor to trust.
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
With the market split between premium pricing and perceived upside, it makes sense to look under the hood yourself and move quickly while sentiment is mixed. To see what others are optimistic about and how that lines up with your own view, take a closer look at the 3 key rewards.
Looking for more investment ideas?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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