Nvidia (NASDAQ: NVDA) is the talk of the stock market these days. Artificial intelligence (AI) stocks have reached a $3 trillion valuation and show no sign of stopping. But the danger in jumping on that bandwagon is that sooner or later the excitement will end and you may find that you bought shares at or near their peak.
Investors have run afoul of exciting growth stocks in the past, buying COVID stocks, meme stocks, metaverse stocks and other thematic stocks, only to watch those investments falter. Perhaps Nvidia will prove to be the exception, but there are arguably better-valued growth stocks to buy right now.
One healthcare stock that looks promising if you’re a long-term investor is Intuitive surgery (NASDAQ: ISRG). You’re still investing in next-generation technologies, and this is a great stock that could have a lot more room to run in the future.
The company’s latest system is AI-ready
Intuitive Surgical makes robot-assisted surgical systems. This year it unveiled its latest version, the da Vinci 5. It features realistic 3D visuals, improved depth perception, improved ergonomics and has more than 150 design innovations that it believes will help improve efficiency and throughput for its users.
The company’s transformative systems have the potential to revolutionize the healthcare industry by making surgery less invasive, faster and more accurate. It can help surgeons save time while leading to better outcomes for patients. The new system also has significantly more computing power than its predecessor, as it can take advantage of developments in AI and machine learning.
In March, the Food and Drug Administration (FDA) provided the da Vinci 5 system with the necessary 510(k) clearance. And the company already installed eight of the systems in the first quarter.
Procedural growth remains strong
An important metric for intuitive investors is the number of procedures used on the surgical systems. It is an important metric that helps gauge the growing popularity of the systems and it is also a source of revenue for the company. Intuitive earns between $800 and $3,600 per surgical procedure because its instruments and accessories have a limited lifespan. The surgical systems themselves can cost as much as $3.1 million, and many of them end up being rented out.
In the first quarter, Intuitive reported 11% revenue growth, and the number of da Vinci procedures grew 16% year over year. And the growth rate in procedures was 21% in the previous period. It’s a good sign of continued strong demand for the company.
Over the past five years, the company’s revenue has nearly doubled from $3.7 billion in 2018 to $7.1 billion in 2023. Profits have also increased by about 60% over that period. And the sector is still growing at a rapid pace. Analysts at Meticulous Research predict that the surgical robot market will be worth more than $25 billion by 2030, based on a compound annual growth rate of 15.4%.
The stock isn’t cheap, but it could be an excellent buy in the long term
At 75 times trailing earnings, investors are paying a hefty premium for Intuitive’s shares. But with plenty of growth ahead and a solid profit margin of 25% last year, this could be one of the best growth stocks to invest in for the long term.
Intuitive’s groundbreaking robotic systems are a great way to invest not only in the long-term growth of the healthcare industry, but also in AI, which will likely unlock new applications for the systems and potentially make them even more useful to surgeons in the future. .
Should You Invest $1,000 in Intuitive Surgery Now?
Consider the following before purchasing shares in Intuitive Surgical:
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Intuitive Surgical and Nvidia. The Motley Fool has a disclosure policy.
Forget Nvidia, buy these great growth stocks instead, originally published by The Motley Fool
