Intuitive Surgical, Inc. (ISRG): what the price requires
At today's price, Intuitive Surgical, Inc. (ISRG) is priced for today's economics sustained for ~13.1 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Source: https://boothcheck.com/report/ISRG
Headline
| Field | Value |
|---|---|
| Ticker | ISRG |
| Company | Intuitive Surgical, Inc. |
| Current price | $407.27/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 26.2% |
| Operating margin today | 29.5% |
| Margin compression implied | -3.3pp |
| Must persist for | 13.1y |
| Multiple paid | 48x operating income |
The operating-margin requirement is derived from the framework's value band at year 8, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 11% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.2 years.
Reconcile: at the x-ray's 9.3% required return this reads ~9.5 years; the models below use their own rates.
How unusual the bet is: high
| Reference | Value |
|---|---|
| vs own history | +0.30σ |
| cohort percentile (of 112 peers) | 90 |
| sustained it ~10 years at this level | 14% |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 4.29x | 5 | expensive |
| Earnings | 4.58x | 5 | expensive |
| Relative | 2.37x | 5 | expensive |
| Growth | 1.00x | 3 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $298.63 | 1.36x | yes | FCF base $3.2B, growth 22% (input: historical growth), terminal g 4.0%, WACC 9.2%, 7yr projection |
| DCF Exit Multiple | Growth | $458.38 | 0.89x | yes | Exit EV/EBITDA: 43.0x / 45.0x / 47.0x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $269.47 | 1.51x | yes | P/E 31.56x (blended: static sector reference 24x + trailing (TTM) 49x), scenarios: 25.5x / 31.6x / 37.6x (bear / base = reference held flat / bull), EV/EBITDA 24.71x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $89.51 | 4.55x | yes | BV/sh $48.57, ROE (TTM) 17.0%, ke 9.3% |
| Two-Stage Excess Return | Asset | $119.94 | 3.40x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $406.40 | 1.00x | yes | Rev $10.6B, growth 22% (input: historical growth; tapered), Terminal P/S: 9.7x / 12.0x / 14.3x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $172.00 | 2.37x | yes | EPS $8.23, growth 21% (input: historical EPS growth), PEG=2.35 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $60.56 | 6.73x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $2.18B × (1−12%) / WACC 9.2% → EPV (no growth) |
| Residual Income | Asset | $120.58 | 3.38x | yes | BV $48.57 + 5yr PV of (ROE (TTM) 17.0% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $94.83 | 4.29x | yes | √(22.5 × EPS $8.23 × BVPS $48.57) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $147.21 | 2.77x | yes | EBITDA $3.22B × sector EV/EBITDA 16.0x |
| FCF Yield | Earnings | $89.06 | 4.57x | yes | FCF $2834.3M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $64.23 | 6.34x | yes | SBC-adj FCF $2.01B (FCF $2.83B − SBC $0.83B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $265.55 | 1.53x | yes | EPS $8.23 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $24.60 | 16.56x | yes | BV $48.57 × (ROIC 4.7% / WACC 9.2%) |
| P/Sales Sector | Relative | $117.64 | 3.46x | yes | Revenue $10.58B × sector P/S 4.0x |
| PEG Fair Value | Relative | $258.00 | 1.58x | yes | EPS $8.23 × (PEG 1.5 × growth 20.9% (input: historical EPS growth)) → PE 31.3x |
| Earnings Yield | Earnings | $88.97 | 4.58x | yes | EPS $8.23 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $4.5b |
| Net debt / NOPAT (after-tax) | -1.75x (net cash) |
| Net debt / operating income (pre-tax) | -1.54x (net cash) |
| Share count CAGR (buyback) | -0.5% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- Intuitive Surgical dominates robotic surgery: it places da Vinci systems in hospitals, then earns recurring revenue every time a surgeon uses them, the razor-and-blade model applied to the operating room.
- The decisive number is procedure growth: worldwide da Vinci and Ion procedures grew about 17% in the most recent quarter, with the new da Vinci 5 driving an upgrade cycle.
- The defining risk is the price: only the forward-growth method reaches it, so a buyer is paying a durability premium that requires the procedure-growth engine to compound for well over a decade.
Bull Case
Address the bear's main worry first, that the valuation is too rich, because the business underneath is built precisely to grow into a premium. The single best feature of Intuitive Surgical is its revenue model: the company places a da Vinci system in a hospital, and then earns money on the instruments, accessories, and service every single time that system is used. Each placement is an annuity that compounds with procedure volume. Worldwide procedures grew about 17% in the most recent quarter, da Vinci up roughly 16% and Ion up 39%, which means the recurring revenue base is expanding at a high-teens clip independent of how many new systems sell.
The installed base is the moat, and it is widening. Total installed systems rose 12% year over year, and the new da Vinci 5 platform is catalyzing an upgrade cycle, with 232 da Vinci 5 placements in the most recent quarter against 147 a year earlier. Once a hospital buys a da Vinci system, trains its surgeons on it, and builds its surgical workflow around it, switching to a competitor means re-equipping and retraining, a barrier so high that Intuitive has held its dominant position for years. The 10-K describes a deliberate product ladder, the da Vinci 5, the cost-focused da Vinci X for "price-sensitive geographic markets", and the single-port da Vinci SP for narrow workspaces, that lets the company address different hospitals and procedures without ceding share.
The financial quality is exceptional. Revenue grew 23% to $2.77 billion in the most recent quarter, the company runs a roughly 30% operating margin, and it holds about $4.5 billion of net cash with no debt. A business that combines high-teens procedure growth, a recurring-revenue razor-blade model, a near-monopoly installed base, and a fortress balance sheet is the rare company that can compound for a very long time. The bull case is that the durability is real, and the price, while high, is paying for a growth runway, expanding into new procedures and new geographies, that genuinely extends years out.
Bear Case
The bear case is a narrative-dependency challenge: the price requires Intuitive's growth to stay high for an unusually long time, and the most recent guidance is the first hint that the steepest part of the curve may be behind it. Despite printing 17% procedure growth in the quarter, management guided full-year procedure growth down to a midpoint around 14.5%. That is still excellent, but the direction matters: the price is built on durable compounding, and any sign that the compounding is decelerating challenges the assumption the whole valuation rests on. A great business growing a little slower than the market assumed is how high-multiple stocks de-rate.
The valuation makes that sensitivity acute. Three of the four method families, asset value, earnings power, and peer multiples, all say the stock is richly valued; only the forward-growth method reaches the price. Invert the price and it requires the company to sustain its growth and hold margins above 25% over a horizon beyond thirteen years. That is a long time to keep growing at a high rate, and the base rate for companies sustaining that pace that long is low. The static methods offer no floor: if procedure growth fades toward the low double digits, the premium that only the growth method can justify compresses, and there is a lot of premium to compress.
The competitive and structural risks, while modest today, are real over that long horizon. Large medical-device companies have been developing rival surgical robots, and as Intuitive's foundational patents age, the barrier that protected its pricing weakens at the edges. The 10-K also flags that third parties may offer "remanufactured or unauthorized instruments and accessories" or unauthorized service, a direct threat to the recurring-revenue razor-blade economics that justify the multiple. The balance sheet is pristine, $4.5 billion of net cash and no debt, so this is not a solvency bear. It is purely a valuation-and-durability bear: an extraordinary business whose price requires it to stay extraordinary for far longer than most companies manage, just as its own guidance points to growth easing off its peak.
Valuation
The price embeds one assumption above all others: that Intuitive Surgical keeps compounding at a high rate for an unusually long time. Invert the price and it requires the company to sustain its growth and hold operating margins above 25% over a horizon beyond thirteen years. That is the bet, and it is a bet on duration more than on any single year's result. The business is excellent; the question the price asks is how long excellent lasts.
The methods make the premium explicit. Three of the four families, asset value, earnings power, and peer multiples, all read the stock as richly valued; only the forward-growth method reaches the price. That is the signature of a durable-compounder premium: the static methods structurally cannot price the next decade of recurring procedure growth, so they land below the price, and the spread between them and the price is the value the market assigns to the compounding continuing. The recurring instrument-and-accessory revenue tied to a growing installed base is the engine the growth method is crediting, and the razor-blade model is real. The risk is entirely the duration: the recent guidance cut, to a procedure-growth midpoint near 14.5%, hints that the steepest growth may be easing, and a small deceleration compresses a large premium.
Solvency is a non-issue and slightly beside the point. Intuitive holds about $4.5 billion of net cash, carries no debt, and has a roughly flat share count, so there is no leverage risk and no dilution drag. The balance sheet bounds nothing here because the risk is not financial distress; it is multiple compression if growth slows. The decisive variable is the durability of procedure growth, expanding into new procedures and geographies through the da Vinci 5 cycle. At today's price, that durability is not the upside case; it is the base case the buyer is already paying for, which is what makes the gradual deceleration in guidance the number to watch.
Catalysts
The most recent quarter, the first of 2026, was a strong print that nonetheless signaled deceleration ahead. Revenue rose 23% year over year to $2.77 billion, and worldwide procedures grew about 17%, with da Vinci procedures up roughly 16% and Ion up 39%. System placements reflected the upgrade cycle: 232 da Vinci 5 systems were placed versus 147 a year earlier, and the total installed base grew 12%.
The da Vinci 5 platform is the central catalyst. It is driving a multi-year upgrade cycle as hospitals trade up from older systems, which lifts both system revenue and the recurring instrument-and-accessory revenue that follows higher procedure volume. The continued rollout across more hospitals and more procedure types is the engine the valuation depends on.
The forward signal the market focused on was guidance. Despite the 17% procedure growth in the quarter, management set full-year da Vinci procedure growth guidance to roughly 13.5% to 15.5%, a midpoint around 14.5%, implying the peak growth rates are beginning to ease. The quarterly procedure-growth number is the metric that matters most, because the price is built on durable compounding, and each print is a referendum on whether the deceleration is gentle or accelerating.
Peer Cohorts (Per Segment, With Filing Citations)
Surgical systems (single segment) (reported)
- GMED (GLOBUS MEDICAL, INC.)
- (no filing in the citation store)
- BSX (BOSTON SCIENTIFIC CORP)
- (no filing in the citation store)
- SYK (STRYKER CORP)
- (no filing in the citation store)
- MDT (Medtronic plc)
- (no filing in the citation store)
- EW (EDWARDS LIFESCIENCES CORPORATION)
- (no filing in the citation store)
- TFX (TELEFLEX INCORPORATED)
- (no filing in the citation store)
- DXCM (DEXCOM, INC.)
- (no filing in the citation store)
- PODD (INSULET CORPORATION)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Intuitive Surgical Q1 2026 earnings release · Intuitive Surgical Q1 2026 earnings call