ISRG – irrational exuberance ?
Posted on July 24th, 2008 in ISRG, Intuitive Surgicals., Irrational Exuberance
Here’s a quiz question – anyone remembers the day when Greenspan said the magic words “Irrational Exuberance” ? Answer: The day was December 5th 1996. Yes it was almost a dozen years ago…..
Back to ISRG – a very well run company, and local [off Kifer in Sunnyvale]. Nice profit margins, explosive growth, etc. etc. What is to not like here ?
Valuation. When a stock like ISRG is valued at 15x sales and 75x TTM earnings, there is little room for mistakes. Plus, the usual suspects are working on similar operating robots [though daVinci has the edge of being first, and being excellent]. While I have thoughts of robots going berserk – when a person is anesthetized and being operated on, daVinci has redundant circuits that will allow it to work even if the primary circuits fail.
Back to valuation. Even Cisco stumbled during their historic run in the 1990’s. I guarantee that ISRG will stumble. While in ISRG investors’ eyes, it will be a minor miss of heck, say 10% below the 50% projected growth rate, it will be enough to kill the stock to a TTM PE of 25…. while I do not sport a beard and wear Italian Suits, I GUARANTEE IT.
January 29th, 2009 at 11:21 pm
[...] ISRG traded at a PS of 10 and a PE of 75, I opined that – ISRG is worth a look if the PE drops to below 25. Much like Cisco’s fall from grace that was brief – back in 1994. CSCO went up in value [...]