last posts

This robotics company is a better choice than Medtronic's stock


We believe Intuitive surgical stock (NASDAQ: ISRG) is currently a better choice than Medtronic Stock (NYSE: MDT), given its better outlook. Although Medtronic trades at a comparatively lower valuation of 3.4x its rolling earnings versus 15.4x for Intuitive Surgical, this discrepancy in valuation is mostly justified given the latter’s superior revenue growth and lower financial risk. , as shown below.

If we look at stock returns, MDT and ISRG have fallen more than 21% over the past year, matching the 20% decline of the broader S&P 500 index. There’s more to the comparison, and in the sections below we explain why we believe ISRG stock will outperform MDT stock over the next three years. We compare a host of factors such as historical revenue growth, returns and valuation multiple in an interactive dashboard analysis Medtronic vs. Intuitive Surgical: Which stock is a better bet? Parts of the analysis are summarized below.

1. Intuitive Surgical revenue growth is better

  • Intuitive Surgical’s revenue growth of 11.3% over the last twelve months is much better than -1.7% for Medtronic.
  • Even if we look at a longer time frame, Intuitive Surgical fared better, with sales growing at an CAGR of 16.2% to $5.7 billion in 2021 from $3.7 billion. dollars in 2018, while Medtronic saw its revenue increase on average. annual rate of just 1.3% to $31.7 billion in fiscal year 2022 (Medtronic’s fiscal year ends in April), compared to $30.0 billion in 2018.
  • Medtronic’s sales have been hit during the pandemic due to the postponement of elective surgeries. The rise of new variants of Covid-19, including Delta and Omicron, has impacted the recovery in demand.
  • However, the company has seen a rebound in sales over the past year or so, helped by a higher volume of proceedings. The company also benefits from its new products, including the Micra AV stimulator and the Abre self-expanding vein stent system for deep vein disease.
  • Sales of its Medical-Surgical segment are negatively affected due to a continued decline in demand for ventilators. In addition, forex headwinds have also weighed on overall revenue growth in recent quarters.
  • For Intuitive Surgical, revenue growth over the past few years has been driven by a rebound in procedure volume, which was negatively impacted in the early stages of the pandemic due to on-site lockdown restrictions. The company continues to expand its installed base, which is reflected in the growth of recurring revenues, such as consumables.
  • Our Medtronic Revenue Comparison and Intuitive comparison of surgical income dashboards provide more information about business sales.
  • Going forward, Intuitive Surgical’s revenue is expected to grow faster than Medtronic’s over the next three years. The table below summarizes our revenue forecasts for both companies over the next three years. It shows a CAGR of 1.6% for Medtronic, compared to a CAGR of 13.7% for Intuitive Surgical, based on Trefis Machine Learning analysis.
  • Note that we have different methodologies for businesses that are negatively impacted by Covid and those that are not impacted or positively impacted by Covid while forecasting future revenue. For businesses negatively impacted by Covid, we consider the quarterly revenue recovery trajectory to forecast recovery at the pre-Covid revenue run rate. Beyond the recovery point, we apply the average annual growth observed three years before Covid to simulate a return to normal conditions. For companies with positive revenue growth during Covid, we consider the average annual growth before Covid with some growth weight during Covid and the last twelve months.

2. Medtronic is more profitable, but it comes with higher risk

  • Medtronic’s operating margin of 21.2% in the last twelve months is slightly higher than 20.5% for Intuitive Surgical.
  • This compares to the figures of 25.2% and 30.7% seen in 2019, before the pandemic, respectively.
  • Intuitive Surgical’s free cash flow margin of 24.7% is also higher than Medtronic’s 23.0%.
  • Our Medtronic Operating Revenue Comparison and Intuitive Surgical Operating Income dashboards have more detail.
  • When it comes to financial risk, Intuitive Surgical fares better. Its 0.5% debt as a percentage of equity is well below 21.6% for Medtronic, while its 61.7% cash as a percentage of assets is above 9.9% for the latter, implying that Intuitive Surgical has a better debt position and more cash cushion. .

3. Filet of Everything

  • We see that Intuitive Surgical has demonstrated better revenue growth, has a better debt position and has a larger cash cushion. On the other hand, Medtronic is more profitable and is available at a comparatively lower valuation.
  • As for the outlook, using P/S as a basis, due to the large swings in both P/E and P/EBIT, we believe Intuitive Surgical is currently the better choice of the two.
  • The table below summarizes our revenue and performance expectations for Medtronic and Intuitive Surgical over the next three years and indicates an expected return of 15% for Medtronic over this period versus an expected return of 46% for Intuitive Surgical, based on Trefis Machine Learning analysis. – Medtronic vs. Intuitive Surgical – which also provides more detail on how we arrive at these numbers.

Although ISRG stock seems like a better choice than MDT stock, it is worth seeing how Medtronic peers price on the measures that matter. You will find other useful comparisons for companies in all sectors on Peer comparisons.

In addition, the Covid-19 crisis has created many price discontinuities, which can offer interesting trading opportunities. For example, you’ll be surprised how counter-intuitive stock valuation is to UnitedHealth Group v Pool Corporation.

Considering rising inflation and the Fed’s hike in interest rates, among other factors, MDT stock fell more than 20% last year. Can it fall more from here? See how far Medtronic’s stock can go by comparing its drop in past stock market crashes. Here is a summary of how all stocks performed during previous stock market crashes.

What if you were looking for a more balanced portfolio instead? Our quality portfolio and multi-strategy portfolio have consistently beaten the market since the end of 2016.

Return Jan 2023
MTD [1]
YTD [1]
Total [2]
Back MDT 4% 4% 14%
Back ISRG 2% 2% 283%
S&P 500 return 0% 0% 72%
Trefis Multi-Strategy Portfolio 2% 2% 221%

[1] Monthly and cumulative total as of 1/5/2023
[2] Cumulative total returns since the end of 2016

Invest with Trefis Portfolios that outperform the market
See everything Trefis Price Estimates

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



Font Size
lines height