Caution on ISRG

ISRG has been on a tear, but I am not a big fan. I explain my rational below.

Intuitive Surgical has been one of the higher flyers in the world of biotech / medical technology.

ISRG has nearly quadrupled from its nadir - although it is pretty much flat from two years ago (which is not too bad in today's market either.) They blew out earnings a few days ago, and the stock has been on a tear. The company makes the Da Vinci robot that is used in minimally invasive surgery. The technology is amazingly cool and the company makes money both selling the device and disposal items that are bought on a per surgery basis.

Minimally invasive surgery has been a hot topic - patients love the idea, and as a result hospitals want to be able to offer it. The clinical utility though is unclear. In cardiac surgery, the popularity seems to be decreasing - most surgeons have concluded that this method is suboptimal and no more comfortable for patients than a traditional approach.

The only area where the procedure has really caught on is prostate surgery. Apparently the device is a game changer in the tight spaces around the prostate. But without any other growth areas, it is hard for me to imagine that the rapid growth of this company can continue. There are indeed a lot of patients with prostate cancer, but most do not need surgery. In my area, the urologists who do this already have access to the device.

I suspect that a PE of 60 is not going to last very long. I am a little afraid to short anything that has moved this fast to the upside. The market can remain irrational far longer than I can remain solvent. But, I certainly wouldn't be a buyer here.

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