Better to buy: Intuitive surgeon or InMode?
Intuitive surgery (NASDAQ: ISRG) In Mode (NASDAQ: INMD) are both tech-intensive companies that are aggressive disruptors in their respective healthcare markets, and the similarities don’t end there. While Intuitive Surgical manufactures da Vinci surgical robots for use by general surgeons in hospitals, InMode produces advanced beauty care equipment that serves a similar role to both laser skin treatments and plastic surgeries. While Intuitive is a giant worth $ 126 billion, InMode’s market cap is only $ 7 billion, but both companies have plenty of room to grow.
Will Intuitive’s strong and highly recurring revenue model make it a better investment, or do InMode’s new products and relatively small size make it a more attractive choice for growth? Let’s look at a few arguments for each.
The Bull Affair for Intuitive
Adria Cimino (intuitive surgery): Intuitive holds 79% of the robotic surgery market. And that is unlikely to change anytime soon. For two main reasons. First, hospitals pay around $ 2 million for Intuitive’s flagship da Vinci robot. After spending so much, it is unlikely that they will aim to replace the robotic system with another. Second, surgeons usually train on the da Vinci. Switching to a new system would require additional training. And that would mean an investment of time and money for hospitals and surgeons. Thus, it can be difficult for rivals to overthrow Intuitive.
The coronavirus pandemic took a toll on Intuitive’s profits and revenue. That’s because hospitals have postponed many elective surgeries as they focused on managing COVID patients. So there was no need to invest in new surgical robots or buy instruments and accessories. But it was a temporary problem. Intuitive’s profits and annual revenue have generally increased over the past decade. And the most recent earnings report shows activity is rebounding from last year’s hiatus. For example, da Vinci procedures increased 20% globally in the third quarter year over year. Once hospital operations return to normal, Intuitive’s business should return to steady growth over time.
Now let’s talk about how Intuitive generates income. Selling expensive surgical systems is great. But hospitals don’t make these kinds of purchases every day. Here’s one of the best parts of the intuitive story. The company actually derives most of its revenue from the sale of instruments and accessories, not from the sale of the entire da Vinci system. He also makes a fair share of the income through the sale of services. Intuitive has installed 6,525 da Vinci systems worldwide. And they all need disposable parts replacement and maintenance. This equates to a huge stable income opportunity for Intuitive. And that should translate into long-term market share gains.
The case (prettier than ever) for InMode
Alex Carchidi (In Mode): Plastic surgery is increasingly popular, but many patients are put off by its invasiveness as well as its cost. This is where Israel-based InMode comes in with its line of less invasive body contouring, fat melting and skin reshaping technologies.
Using radio frequency (RF) technology, the company’s devices are intended for use by cosmetic surgeons in situations where plastic surgeries might otherwise be appropriate. But, RF-based procedures don’t have as much downtime for the patient, they don’t require anesthesia, and they don’t leave nasty scars. And, because the techniques aren’t as onerous on patients as surgery, they can also capture some of the market share that would otherwise be held by less effective non-invasive methods like laser skin treatments. In short, InMode’s products are breakthrough innovations that can dramatically lower the bar for complex, high-impact cosmetic treatments.
In terms of financial performance, InMode is highly profitable, with a net profit margin of just over 46%, and its quarterly revenues grew 57.7% year-on-year to $ 94.2 million according to its latest. update of results. Likewise, quarterly net profits grew more than 87% year-on-year, and there is no sign of stopping. And with just $ 3.55 million in debt, it has plenty of leeway to borrow to fuel its future growth. This means that there shouldn’t be many economic hurdles when it comes to replacing old cosmetic procedures.
At present, InMode opens the distribution of its material to new countries in the EU and around the world. It is also launching new devices and accessories for its existing product line that provide patients with advanced, non-invasive body sculpting capabilities that cannot be found anywhere outside of a plastic surgeon’s office, which is expected to generate further. more revenue growth in the future.
It’s a blow
Intuitive and InMode are very likely to continue to grow for the foreseeable future, and both stocks are favorable investments. So the question of which is the best buy is largely a question of risk tolerance.
Intuitive is an established leader in robotic surgery and its business model has stood the test of time. This makes it a better option if you have a low tolerance for risk. In contrast, InMode is the new competitor on the block, and it is pioneering a new technology that makes its products superior to the competition – but its economic viability in the years to come is still not proven. As a result, it is probably the preferable choice for more aggressive investors.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.