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October 31, 2018 | Intuitive Surgical, Inc. | ISRG

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This week’s Stock of the Week is the maker of an innovative type of medical device.

Superior Surgery

Intuitive Surgical, Inc. (ISRG) makes the da Vinci robotic surgical system, which translates a surgeon’s natural hand movements outside of a patient’s body into the mechanized operation of micro-instruments inside the patient. This improves efficiency and patient outcomes in certain cardiac, urologic, gynecologic, head-and-neck and other surgeries.

Intuitive Surgical services the systems it sells and frequently upgrades its software—about 70% of its revenue is recurring and very stable. It has a very high customer-retention rate and benefits from a strong barrier to entry in its sector because any competitor would have to retrain surgeons on an entirely different system.

Investor concern has revolved around Intuitive’s plan to adapt the da Vinci system for additional forms of surgery, where other companies already have or can develop a foothold. But the company has proved highly resilient and has excellent relationships with a large hospital base, so those concerns seem overdone. Earnings continue growing quickly, and so does revenue, from $3.1 billion in 2017 to a likely $3.7 billion in 2018 and $4.2 billion in 2019.

Fiscal year: December. Earnings per share: 2019 est./$12.25…2018 est./$10.84…2017/$8.99.

Randy Hare is director of equity research, Huntington Private Bank, Columbus, Ohio, which has $17 billion under management. Huntington.com

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