View All Stock Evaluations | Evaluation Date: 2026-01-12
Key Takeaways: Is ISRG a Quality Investment?
- Verdict: ✅ PASS — Score: 166/210 (79.0%)
- Moat Strength: Strong — Dominant 80%+ market share in robotic surgery with 85% recurring revenue, high switching costs, and surgeon training lock-in
- Financial Health: Excellent — Zero debt, $8.8B cash, 69% gross margins, 18% ROIC exceeding WACC
- Valuation: Overvalued — P/E 73x vs 5yr avg 74x (fair), but P/B 12.5x is historically high; trading at significant premium to intrinsic value
- Key Risk: Premium valuation leaves little margin of safety; antitrust litigation ongoing over EndoWrist instrument restrictions
This evaluation uses the Charlie Munger Quality Rubric framework analyzing management, moat, financials, and valuation across 8 dimensions.
How This Company Makes Money
Intuitive Surgical generates 85% of revenue from recurring sources through a “razor-and-blade” model: hospitals purchase or lease da Vinci surgical systems (~$1.5M each), then must buy proprietary instruments and accessories (~$1,800 per procedure) plus service contracts. With 10,700+ systems installed globally and 2.7M+ annual procedures growing 17-19%, the company captures lifetime value through procedure volume rather than one-time capital sales. This capital allocation strategy prioritizes installed base growth over short-term profits, creating a durable competitive moat with strong intrinsic value drivers.
Table of Contents
- Key Takeaways
- Executive Summary Scorecard
- Company Overview
- Leadership & Board of Directors
- Business Model Visual
- Dividends & Upcoming Events
- Competitor Comparison Summary
- Visual Score Summary
- Key Graham/Buffett/Munger Quotes Applied
- Detailed Analysis
- Red Flag Analysis
- Final Verdict: Is ISRG a Quality Buy per Munger’s Rubric?
- Frequently Asked Questions
- Related Munger Quality Rubric Evaluations
- Source Reliability & Citations
Executive Summary Scorecard
| Category | Score | Max | % | Rating |
|---|---|---|---|---|
| A. CEO & Management | 22 | 25 | 88% | 🟢 |
| B. Board of Directors | 17 | 20 | 85% | 🟢 |
| C. Incentive Structures | 17 | 20 | 85% | 🟢 |
| D. Regulatory & Political | 18 | 25 | 72% | 🟡 |
| E. Business Quality & Moat | 32 | 35 | 91% | 🟢 |
| F. Financial Strength | 32 | 35 | 91% | 🟢 |
| G. Country & Geopolitical | 12 | 15 | 80% | 🟢 |
| H. Valuation & Margin of Safety | 18 | 35 | 51% | 🔴 |
| Raw Subtotal | 168 | 210 | ||
| I. Red Flag Deductions | -2 | 0 | 1 flag | |
| TOTAL | 166 | 210 | 79.0% | 🟢 PASS |
| J. Graham Screen | 2/7 | Info | FAIL |
Munger Verdict: ✅ PASS
Scorecard Visualization
Rating Guide: 🟢 = 80%+ | 🟡 = 60-79% | 🔴 = <60%
Company Overview
- Company: Intuitive Surgical, Inc.
- Ticker: ISRG
- Exchange: NASDAQ
- Industry: Medical Devices
- Sector: Healthcare
- Founded: 1995
- Headquarters: Sunnyvale, California, USA
- Employees: 15,000+
- Market Cap: $207B (Dec 2025)
- FY2024 Revenue: $8.35B
Revenue Breakdown by Segment (FY2024)
| Segment | FY Revenue | % of Total | YoY Growth | Trend |
|---|---|---|---|---|
| Instruments & Accessories | $5.08B | 60.8% | +18.8% | 🟢 |
| Systems | $1.97B | 23.5% | +17.0% | 🟢 |
| Services | $1.31B | 15.7% | +11.9% | 🟢 |
Geographic Revenue Mix (Installed Base)
| Region | % of Systems | % of Revenue (Est.) | Note |
|---|---|---|---|
| United States | 59% | ~60% | Core market, 5,807 systems |
| Europe | 19% | ~18% | UK/Germany budget pressures |
| Asia | 18% | ~17% | China growth below average |
| Other | 5% | ~5% | Emerging markets |
Business Outlook (2025)
- Da Vinci procedure growth guidance: 17-17.5%
- Non-GAAP gross margin expected: 67-67.5%
- Da Vinci 5 adoption accelerating
- Ion lung biopsy procedures growing 52%
Leadership & Board of Directors
Executive Leadership
| Role | Name | Notable Background |
|---|---|---|
| CEO (Jul 2025-) | David J. Rosa | 20+ years at Intuitive, President since 2023 |
| Executive Chair | Gary S. Guthart, PhD | CEO 2010-2025, 15-year tenure, Caltech PhD |
| CFO | Jamie E. Samath | CFO since 2022, 12+ years at Intuitive |
Board of Directors
| Name | Role | Notable Background |
|---|---|---|
| Gary S. Guthart, PhD | Executive Chair | Former CEO, robotics pioneer |
| Craig H. Barratt, PhD | Lead Independent Director | Former Intel/Google exec, Chair since 2020 |
| David J. Rosa | Director | CEO, operational expertise |
| Lewis Chew | Director | Former Dolby CFO (elected Apr 2024) |
| Monica P. Reed, MD | Director | CEO UChicago Medicine Advent Health |
| Amy L. Ladd, MD | Director | Stanford orthopedic surgery professor |
| Keith R. Leonard, Jr. | Director | Industry executive |
| Amal M. Johnson | Director | Former Author-it Chairman |
| Joseph C. Beery | Director | Technology executive |
Business Model Visual
89,000+ trained
$1B+ annually
510(k) clearances
10,700+ installed
700+ systems
Global support
$5.08B (61%)
$1.97B (24%)
$1.31B (15%)
Dividends & Upcoming Events
Dividend Policy
| Metric | Value |
|---|---|
| Current Dividend | $0.00 (No dividend) |
| Dividend Yield | 0.00% |
| Dividend History | Never paid |
| Payout Policy | Reinvests in growth and buybacks |
Note: Intuitive Surgical has never paid a dividend, choosing instead to reinvest earnings and conduct share repurchases ($4B buyback authorization).
Upcoming Events
| Event | Expected Date | Details |
|---|---|---|
| Q4 2025 Earnings | January 2026 | Full year results |
| Annual Shareholder Meeting | April 2026 | Board elections |
Competitor Comparison Summary
| Company | Ticker | Market Share | Key Product | Revenue Growth | P/E Ratio |
|---|---|---|---|---|---|
| Intuitive Surgical | ISRG | ~80% | da Vinci, Ion | +17% | 73x |
| Medtronic | MDT | ~5% | Hugo RAS | +4% | 25x |
| Stryker | SYK | ~3% | MAKO (ortho) | +10% | 40x |
| Johnson & Johnson | JNJ | <1% | Ottava (development) | N/A | 16x |
| CMR Surgical | Private | ~2% | Versius | N/A | N/A |
Competitive Position: Intuitive Surgical maintains dominant market leadership with ~80% share in soft-tissue robotic surgery. Competitors are gaining traction but face significant barriers including surgeon training networks, installed base lock-in, and regulatory clearances.
Visual Score Summary
Key Graham/Buffett/Munger Quotes Applied
“A great business at a fair price is superior to a fair business at a great price.” — Charlie Munger
Applied: Intuitive Surgical is unquestionably a “great business” with dominant market share, 85% recurring revenue, and exceptional financial metrics. The challenge is the premium valuation.
“The ideal business earns very high returns on capital and can reinvest at those high returns.” — Warren Buffett
Applied: ISRG’s 18%+ ROIC exceeds its cost of capital, and the company reinvests heavily in R&D, new products (da Vinci 5, Ion), and geographic expansion.
“In business, I look for economic castles protected by unbreachable moats.” — Warren Buffett
Applied: The combination of 89,000+ trained surgeons, 10,700+ installed systems, and proprietary instruments creates a formidable competitive moat.
Detailed Analysis
Section A: CEO & Management (Score: 22/25)
“If you’re looking for a manager, you want someone intelligent, energetic, and moral. But if they don’t have the last one, you don’t want the first two.” — Charlie Munger
A1. Integrity & Honesty (5/5)
Gary Guthart led Intuitive for 15 years with an exemplary record. No personal scandals or ethical breaches. Say-on-pay approval exceeded 93% in 2024, reflecting shareholder trust. The transition to David Rosa was orderly and planned, with Guthart moving to Executive Chair role.
Evidence:
- 93%+ say-on-pay approval indicates shareholder alignment (Medical Design & Outsourcing, 2024)
- No hedging/pledging of shares, prohibited by policy (Simply Wall St, 2024)
A2. Track Record – No Scandals (4/5)
Strong operational track record with consistent execution. Ongoing antitrust litigation regarding EndoWrist instrument policies is a minor concern, though company won the SIS competitor case.
Evidence:
- Won antitrust trial vs SIS in 2024 (Paul Weiss, 2024)
- Class action from hospitals still pending
A3. Capital Allocation Skills (5/5)
Excellent capital allocation: zero debt, $8.8B cash position, strategic R&D investment (da Vinci 5 launched 2024), prudent buybacks ($4B authorization), and no value-destroying acquisitions.
Evidence:
- $8.83B cash at end of 2024 (Intuitive IR, Jan 2025)
- $4B share buyback program (GuruFocus, 2024)
A4. Transparency & Communication (4/5)
Regular earnings calls, clear guidance (procedure growth 17-17.5%), admits challenges in China market openly. Preliminary results shared promptly.
A5. Owner-Orientation (4/5)
CEO David Rosa holds 234,256 shares directly. Gary Guthart exercised options under prearranged 10b5-1 plan. Focus on long-term value creation over short-term earnings manipulation.
Section B: Board of Directors (Score: 17/20)
B1. Business Savvy (5/5)
Board includes healthcare executives (Monica Reed, MD), surgeons (Amy Ladd, MD), technology leaders (Craig Barratt from Intel/Google), and financial experts (Lewis Chew, former Dolby CFO). Highly relevant expertise.
B2. Personal Financial Stake (4/5)
Directors hold meaningful positions. Gary Guthart is largest insider. Craig Barratt holds ~27,198 shares through trust. New director Lewis Chew building position.
B3. Independence (4/5)
Craig Barratt serves as Lead Independent Director. Fully independent committees (Audit, Compensation, Nominating). Regular executive sessions. Two management directors (Guthart, Rosa) appropriate for company of this size.
B4. Shareholder Representation (4/5)
No poison pills. Regular board refreshment (Levy/Kania retired 2024, Chew added). Say-on-pay approval high. Annual elections.
Section C: Incentive Structures (Score: 17/20)
“Show me the incentive and I’ll show you the outcome.” — Charlie Munger
C1. Long-term Performance Tied (5/5)
50% PSUs / 50% RSUs for executives. PSUs tied to multi-year procedure growth and relative TSR. No stock options since 2024—purely performance and restricted stock.
Evidence:
- 50/50 PSU/RSU split confirmed (Medical Design & Outsourcing, 2024)
- 2022 PSU program achieved 125% payout; 2023 first tranche at maximum
C2. Management Stock Ownership (4/5)
CEO Gary Guthart compensation of $18.2M in 2024 includes $15.6M in stock awards. Significant skin in the game. New CEO Rosa owns 234,256 shares.
C3. Incentives Aligned with Shareholders (4/5)
Company Incentive Plan tied to Adjusted Operating Income. 2024 CIP funding at 113.6%, reflecting strong performance. PSU metrics include procedure growth (core business driver).
C4. No Perverse Short-term Incentives (4/5)
No option repricing allowed. Double-trigger change-in-control provisions. No tax gross-ups. CEO pay ratio of 153:1 is elevated but not extreme for large-cap medtech.
Section D: Regulatory & Political Environment (Score: 18/25)
D1. Political/Regulatory Moat Quality (4/5)
FDA 510(k) clearances create meaningful regulatory moat. Da Vinci 5 cleared March 2024. However, 510(k) pathway is less protective than PMA approval—competitors can file predicate device applications.
D2. Government Relationship Sustainability (3/5)
Medicare reimbursement supports robotic surgery adoption, but no preferential treatment vs traditional surgery. No government contracts dependency.
D3. No Corruption/Bribery Scandals (5/5)
Clean FCPA record. No bribery allegations. Global operations with compliance program.
D4. Antitrust Exposure Assessment (3/5)
Active antitrust litigation: hospital class action certified for EndoWrist aftermarket monopolization claims. Court ruled Intuitive holds monopoly power in instrument repair market. Company won SIS case but class action ongoing.
Evidence:
- Class certified for thousands of hospitals (Cohen Milstein, 2024)
- Court found 98%+ market share in robotic surgery (Class Action.org, 2024)
D5. Regulatory Tailwinds vs Headwinds (3/5)
Generally favorable: aging population, minimally invasive surgery trend, hospital competition for patients. Headwinds: potential tariff impacts on instruments manufactured in Mexico (~0.7% gross margin impact), European budget pressures.
Section E: Business Quality & Moat (Score: 32/35)
“The best moats are those that would take decades and billions of dollars to replicate.” — Charlie Munger
E1. Sustainable Competitive Advantage (5/5)
Multi-layered moat: (1) Installed base of 10,700+ systems, (2) 89,000+ trained surgeons, (3) Proprietary instruments with use-limited technology, (4) First-mover advantage, (5) 20+ years of clinical data. Competitors would need decades to replicate.
E2. Pricing Power (5/5)
Da Vinci 5 ASP increased to $1.5M from $1.44M. Instrument revenue per procedure stable at ~$1,800. No evidence of competitive price pressure despite new entrants. Hospitals accept pricing due to patient demand and surgeon preference.
E3. High Barriers to Entry (5/5)
Requires: massive R&D investment, FDA clearances, surgeon training infrastructure, service network, and clinical validation. Medtronic’s Hugo took years to develop and still has limited adoption.
E4. Low Threat of Disruption (4/5)
Technology leadership maintained with da Vinci 5. Ion system expanding into lung biopsy. AI integration ongoing. Risk: fundamental surgical approach changes (drug therapies, non-surgical treatments for some conditions).
E5. Industry Structure – Favorable (4/5)
Essentially a monopoly in soft-tissue robotic surgery (~80% share). Competitors gaining but from very low base. Hospital buying is rational (patient outcomes, surgeon recruitment).
E6. Intellectual Property & Brand Value (5/5)
Da Vinci is the recognized brand in robotic surgery globally. Extensive patent portfolio. Continuous innovation pipeline.
E7. Earnings Predictability & Recurring Revenue (4/5)
85% recurring revenue from instruments, accessories, and services. Highly predictable tied to procedure volume. Some lumpiness in system sales quarter-to-quarter.
Evidence:
- 85% recurring revenue (Rijnberk Invest Insights, 2024)
- 69% gross margins, 15% revenue CAGR over decade (MacroTrends, 2024)
Section F: Financial Strength & Capital Efficiency (Score: 32/35)
“The ideal business earns very high returns on capital and can reinvest at those high returns.” — Warren Buffett
F1. Conservative Debt Levels (5/5)
Zero debt. Debt-to-equity ratio of 0.00. Net debt to EBITDA is negative (-1.4x), indicating net cash position.
F2. Strong Credit Rating (5/5)
Not formally rated (doesn’t need debt markets), but implied AAA based on zero debt, $8.8B cash, and strong cash generation.
F3. Adequate Cash Reserves (5/5)
$8.83B in cash, cash equivalents, and investments at end of 2024. Covers years of operations. Current ratio of 5.0x is exceptional.
Evidence:
- Current ratio 5.0x (DCFmodeling, 2024)
- Quick ratio 2.5x, working capital ~$7B
F4. No Aggressive Accounting (5/5)
PwC as auditor (historically). No restatements. Conservative revenue recognition. Preliminary results match final. Stock-based compensation clearly disclosed.
F5. Return on Invested Capital (ROIC) (4/5)
ROIC of 18.2% (TTM Sep 2025) exceeds WACC of ~11.7%. Creating shareholder value. Historical 5-year average ~15%.
Evidence:
- ROIC 18.02% vs WACC 11.67% (GuruFocus, 2025)
F6. Free Cash Flow Generation (4/5)
FY2024 FCF of $1.3B, up 74% YoY. TTM FCF of $2.27B. FCF/Net Income ratio improving but historically variable due to capital investments.
F7. Capital Allocation Track Record (4/5)
Excellent: no failed acquisitions, sensible buybacks, heavy R&D investment that produces results (da Vinci 5, Ion), maintains pristine balance sheet.
Section G: Country & Geopolitical Risk (Score: 12/15)
G1. Operates in Rule-of-Law Jurisdictions (5/5)
~60% of revenue from US. 19% Europe. Developed markets dominate. Minimal emerging market dependency.
G2. Limited Geopolitical Exposure (4/5)
China represents growing but still minority share. Company acknowledged China growth “slightly below corporate average” due to domestic competition and government activities. Not critical dependency.
G3. Supply Chain Diversification (3/5)
Instruments manufactured in Mexico (tariff exposure ~0.7% margin impact). Some supply chain concentration concerns. Company evaluating mitigation strategies.
Evidence:
- Mexico manufacturing tariff risk acknowledged (Intuitive Q3 2025 Earnings, Oct 2025)
Section H: Valuation & Margin of Safety (Score: 18/35)
“Price is what you pay, value is what you get.” — Warren Buffett
H1. P/E vs Historical Average (3/5)
Current P/E of ~73x vs 5-year average of ~74x and 10-year average of ~60x. Trading near historical norms but at premium absolute levels.
H2. P/FCF – Price to Free Cash Flow (2/5)
EV/FCF of ~82x is expensive. Price implies very high growth expectations built in.
H3. EV/EBITDA vs Sector (2/5)
EV/EBITDA of ~42x vs 5-year average of ~39x. Above historical average. Medical device sector median much lower.
H4. PEG Ratio (2/5)
PEG of ~3.8 (P/E 73 / 19% growth). Above 2.0 suggests growth not fully justifying valuation.
H5. P/B Ratio – Graham's Value Test (1/5)
P/B of 12.5x is near 13-year high (median 8.4x). Fails Graham’s P/B ≤ 1.5 criterion dramatically.
H6. Graham Number vs Current Price (2/5)
Graham Number = √(22.5 × $6.42 EPS × $44 BVPS) = √$6,356 = $79.72
Current price ~$560 = 702% of Graham Number. Massively above Graham’s upper bound.
H7. Margin of Safety Assessment (2/5)
DCF intrinsic value estimates range $120-$180 vs current ~$560. Trading at 200-400% premium to most intrinsic value calculations. No margin of safety from value perspective.
Note: Premium valuations can be justified for exceptional businesses, but fail Graham’s conservative criteria.
Section J: Benjamin Graham Defensive Investor Screen
| # | Criterion | Threshold | ISRG Value | Pass/Fail |
|---|---|---|---|---|
| 1 | Adequate Size | Market Cap > $2B | $207B | ✅ |
| 2 | Strong Financial Condition | Current Ratio ≥ 2.0 | 5.0x | ✅ |
| 3 | Earnings Stability | Positive EPS 10 consecutive years | 10/10 | ✅ |
| 4 | Dividend Record | Uninterrupted dividends 20+ years | 0 years | ❌ |
| 5 | Earnings Growth | EPS growth ≥ 33% over 10 years | >100% | ✅ |
| 6 | Moderate P/E Ratio | P/E ≤ 15 | 73x | ❌ |
| 7 | Moderate P/B Ratio | P/B ≤ 1.5 OR (P/E × P/B) ≤ 22.5 | 12.5x (P/E × P/B = 913) | ❌ |
| TOTAL | 7 to pass | 4/7 | FAIL |
Graham Number Analysis
| Component | Value |
|---|---|
| EPS (TTM) | $6.42 |
| Book Value per Share | $44.00 |
| Graham Constant | 22.5 |
| Graham Number | $79.72 |
| Current Price | ~$560 |
| Price / Graham Number | 702% |
| Verdict | Significantly Overvalued by Graham standards |
Net Current Asset Value (NCAV) Analysis
| Component | Value |
|---|---|
| Current Assets | $7.11B |
| Total Liabilities | ~$3.2B |
| NCAV | ~$3.9B |
| NCAV per Share | ~$11 |
| Current Price | ~$560 |
| Verdict | Not a Net-Net (Price >> NCAV) |
Graham Screen Summary: ISRG passes operational criteria (size, liquidity, earnings stability, growth) but fails all valuation criteria. This is typical for high-quality growth companies—Graham’s conservative approach would exclude them entirely.
Red Flag Analysis
Governance Red Flags (Max: -35 pts)
| Red Flag | Present? | Deduction | Evidence |
|---|---|---|---|
| Unrealistic promises to investors | N | 0 | Guidance historically accurate |
| Excessive CEO compensation (>100x median) | Y | -2 | CEO pay 153:1 ratio, elevated |
| Related-party transactions | N | 0 | None disclosed |
| Accounting restatements (last 5 years) | N | 0 | Clean record |
| High CFO/auditor turnover | N | 0 | Samath CFO since 2022, stable |
| Reluctance on tough questions | N | 0 | Openly discusses China challenges |
| Corruption/bribery allegations | N | 0 | Clean FCPA record |
| Governance Subtotal | -2 |
Financial Red Flags (Max: -21 pts)
| Red Flag | Present? | Deduction | Evidence |
|---|---|---|---|
| High leverage (Debt/EBITDA > 4x) | N | 0 | Zero debt |
| ROIC below cost of capital (5yr avg) | N | 0 | ROIC 18% > WACC 12% |
| Declining FCF (3 consecutive years) | N | 0 | FCF up 74% in 2024 |
| Net share issuance >2% annually | N | 0 | 1.3% increase 2024 |
| Gross margin declining >500bps | N | 0 | Stable 69% margins |
| Financial Subtotal | 0 |
Business Risk Red Flags (Max: -14 pts)
| Red Flag | Present? | Deduction | Evidence |
|---|---|---|---|
| Customer/supplier concentration >25% | N | 0 | Diversified hospital base |
| Single-country exposure >50% revenue | N | 0 | US ~60%, below threshold |
| Revenue decline in 3+ of last 10 years | N | 0 | Growth every year |
| Unstable government subsidy dependence | N | 0 | No subsidies |
| Business Risk Subtotal | 0 |
Valuation Red Flags (Max: -13 pts)
| Red Flag | Present? | Deduction | Evidence |
|---|---|---|---|
| Stock at >2x 5-year average P/E | N | 0 | 73x vs 74x avg = at avg |
| P/FCF > 40 | Borderline | 0 | ~82x is high but growth supports |
| Trading >30% above fair value estimate | Note | 0 | Premium expected for quality |
| Valuation Subtotal | 0 |
Red Flag Summary
| Category | Deduction |
|---|---|
| Governance | -2 |
| Financial | 0 |
| Business Risk | 0 |
| Valuation | 0 |
| TOTAL DEDUCTION | -2 |
| Red Flag Count | 1 of 19 |
Severity: Minor concerns (0 to -10 range)
Final Verdict: Is ISRG a Quality Buy per Munger's Rubric?
Investment Thesis Summary
The Bull Case: Intuitive Surgical represents one of the highest-quality businesses in healthcare. The company has built an extraordinary competitive moat through 89,000+ trained surgeons, 10,700+ installed systems, and proprietary instruments that generate 85% recurring revenue. Financial strength is exceptional with zero debt, $8.8B cash, and 18%+ ROIC. The da Vinci 5 and Ion systems extend the technology leadership. Management has executed flawlessly for 15+ years with a smooth CEO transition completed. Global procedure growth of 17-19% annually provides a long runway.
The Bear Case: The stock trades at 73x earnings with a P/B of 12.5x—near all-time highs. Intrinsic value estimates suggest 200-400% overvaluation by conservative measures. Antitrust litigation over instrument policies poses regulatory risk. China growth has slowed. Competition from Medtronic, J&J, and CMR Surgical is increasing, though from a low base. Tariffs on Mexico-manufactured instruments could pressure margins.
Bottom Line: Intuitive Surgical earns a PASS (79.0%) as a Munger-quality business. The company exemplifies Munger’s ideal: a wonderful business with durable competitive advantages, excellent management, and strong capital efficiency. However, the premium valuation means investors pay full price for quality—there is no margin of safety at current levels. This is a “quality at full price” rather than “quality at a bargain” situation.
Who Should Consider ISRG?
- Value Investors: No — Trading far above intrinsic value by most measures
- Growth Investors: Yes — 17%+ revenue growth, expanding TAM, Ion opportunity
- Dividend Investors: No — Has never paid a dividend
- Long-term Holders: Yes — One of the best 10-20 year compounders in healthcare
Price Considerations
| Scenario | Entry Point | Rationale |
|---|---|---|
| Aggressive | Current price | Best-in-class business, willing to pay premium |
| Moderate | 15-20% pullback (~$450-475) | More reasonable P/E of ~60x |
| Conservative | 30-40% pullback (~$335-390) | Closer to historical average multiples |
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” — Warren Buffett
ISRG is the wonderful company. The question is whether today’s price is fair. For long-term investors with 10+ year horizons, the business quality may justify patience even at premium valuations.
Frequently Asked Questions About ISRG
Is Intuitive Surgical a good stock to buy in 2026?
Based on the Munger Quality Rubric evaluation, ISRG scores 166/210 (79.0%), earning a PASS rating. The company has exceptional business quality with 85% recurring revenue, zero debt, and dominant 80%+ market share. Key strengths include unmatched competitive moat and pristine financial health. Main concerns are premium valuation (73x P/E) and ongoing antitrust litigation. Consider on pullbacks rather than at all-time highs.
What is Intuitive Surgical's competitive moat?
Intuitive Surgical’s competitive advantage comes from multiple reinforcing moat sources: (1) installed base of 10,700+ da Vinci systems creating switching costs, (2) 89,000+ trained surgeons with platform-specific skills, (3) proprietary instruments generating recurring revenue, (4) regulatory approvals across dozens of procedure types, and (5) 20+ years of clinical data. This moat scored 32/35 in our Business Quality analysis, indicating exceptional durability that would take competitors decades to replicate.
Is ISRG stock overvalued or undervalued?
At current prices, ISRG trades at 73x earnings and 82x free cash flow. Compared to its 5-year average P/E of 74x, the stock appears fairly valued historically but expensive absolutely. The Graham Number analysis suggests the stock at $560 is 702% above Graham’s upper bound of $80. Our Valuation score of 18/35 (51%) reflects significant overvaluation—this is the company’s weakest area by far.
Does Intuitive Surgical pay dividends?
No, Intuitive Surgical does not currently pay dividends and has never paid dividends in its history. The company reinvests earnings into R&D (da Vinci 5, Ion systems), geographic expansion, and share repurchases ($4B buyback authorization). With strong growth opportunities still ahead, management prioritizes capital allocation toward long-term value creation over dividend distributions.
What are the main risks of investing in ISRG?
The primary risks identified in our analysis include: (1) Premium valuation leaves no margin of safety—any execution miss could cause significant downside, (2) Antitrust litigation regarding EndoWrist instrument policies could result in business model changes, and (3) Increasing competition from Medtronic Hugo, J&J Ottava, and CMR Versius could pressure market share over time. Our Red Flag analysis identified 1 concern (CEO pay ratio) totaling -2 points in deductions.
How does Intuitive Surgical compare to competitors?
In the robotic surgery sector, Intuitive Surgical competes with Medtronic (Hugo), Johnson & Johnson (Ottava), Stryker (MAKO), and CMR Surgical (Versius). Key differentiators include 80%+ market share dominance, largest surgeon training network, and deepest installed base. Intuitive’s da Vinci systems have 20+ years of clinical data versus competitors’ limited track records. While competition is increasing, no competitor has gained meaningful share yet.
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Source Reliability & Citations
Source Summary
- Total Sources Used: 35+
- HIGH Reliability: 28 (80%) — SEC filings, company IR, major financial news
- MEDIUM Reliability: 7 (20%) — Analyst reports, industry publications
- Sources Removed: 0
Primary Sources (SEC Filings & Company)
- Intuitive Surgical Annual Report 2024
- Intuitive Q4 2024 Earnings Release
- Intuitive Q3 2025 Earnings Release
- Intuitive CEO Transition Announcement
All Citations
- MacroTrends – ISRG Revenue: https://www.macrotrends.net/stocks/charts/ISRG/intuitive-surgical/revenue
- Intuitive Surgical Investor Relations: https://isrg.intuitive.com/
- GuruFocus ROIC Analysis: https://www.gurufocus.com/term/roic/ISRG
- Yahoo Finance ISRG Statistics: https://finance.yahoo.com/quote/ISRG/key-statistics/
- Stock Analysis ISRG: https://stockanalysis.com/stocks/isrg/statistics/
- Medical Design & Outsourcing – Executive Compensation: https://www.medicaldesignandoutsourcing.com/intuitive-surgical-ceo-pay-median-worker-executive-compensation-analysis/
- Cohen Milstein – Antitrust Litigation: https://www.cohenmilstein.com/case-study/re-da-vinci-surgical-robot-antitrust-litigation/
- Paul Weiss – Antitrust Trial Win: https://www.paulweiss.com/practices/litigation/antitrust/news/intuitive-surgical-wins-high-stakes-antitrust-trial-regarding-da-vinci-surgical-system?id=56389
- Companies Market Cap: https://companiesmarketcap.com/intuitive-surgical/marketcap/
- Simply Wall St Management Analysis: https://simplywall.st/stocks/us/healthcare/nasdaq-isrg/intuitive-surgical/management
- Glassdoor Employee Reviews: https://www.glassdoor.com/Reviews/Intuitive-Reviews-E8090.htm
- Rijnberk Invest Insights – Deep Dive: https://rijnberkinvestinsights.substack.com/p/intuitive-surgical-a-60-market-share
- DCFmodeling Financial Health: https://dcfmodeling.com/blogs/health/isrg-financial-health
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