Intrinsic value of Intuitive Surgical - ISRG

Previous Close

$984.31

  Intrinsic Value

$570.25

stock screener

  Rating & Target

sell

-42%

  Value-price divergence*

+71%

Previous close

$984.31

 
Intrinsic value

$570.25

 
Up/down potential

-42%

 
Rating

sell

 
Value-price divergence*

+71%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ISRG stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 38.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  13.42
  13.30
  12.47
  11.72
  11.05
  10.45
  9.90
  9.41
  8.97
  8.57
  8.22
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
Revenue, $m
  2,704
  3,064
  3,446
  3,850
  4,275
  4,722
  5,189
  5,677
  6,187
  6,717
  7,269
  7,843
  8,439
  9,059
  9,703
  10,372
  11,068
  11,792
  12,545
  13,328
  14,144
  14,994
  15,880
  16,804
  17,767
  18,773
  19,824
  20,921
  22,068
  23,268
  24,522
Variable operating expenses, $m
 
  1,097
  1,231
  1,373
  1,523
  1,680
  1,844
  2,016
  2,195
  2,382
  2,576
  2,757
  2,967
  3,185
  3,411
  3,647
  3,891
  4,146
  4,410
  4,686
  4,973
  5,271
  5,583
  5,908
  6,246
  6,600
  6,969
  7,355
  7,759
  8,180
  8,621
Fixed operating expenses, $m
 
  827
  848
  869
  891
  913
  936
  959
  983
  1,008
  1,033
  1,059
  1,085
  1,112
  1,140
  1,169
  1,198
  1,228
  1,259
  1,290
  1,322
  1,355
  1,389
  1,424
  1,460
  1,496
  1,534
  1,572
  1,611
  1,651
  1,693
Total operating expenses, $m
  1,759
  1,924
  2,079
  2,242
  2,414
  2,593
  2,780
  2,975
  3,178
  3,390
  3,609
  3,816
  4,052
  4,297
  4,551
  4,816
  5,089
  5,374
  5,669
  5,976
  6,295
  6,626
  6,972
  7,332
  7,706
  8,096
  8,503
  8,927
  9,370
  9,831
  10,314
Operating income, $m
  945
  1,139
  1,366
  1,607
  1,861
  2,128
  2,409
  2,702
  3,008
  3,328
  3,660
  4,027
  4,387
  4,762
  5,151
  5,557
  5,979
  6,418
  6,876
  7,352
  7,849
  8,367
  8,908
  9,472
  10,061
  10,677
  11,321
  11,994
  12,699
  13,436
  14,208
EBITDA, $m
  1,037
  1,215
  1,448
  1,696
  1,958
  2,234
  2,522
  2,824
  3,140
  3,469
  3,811
  4,168
  4,539
  4,925
  5,326
  5,744
  6,178
  6,630
  7,101
  7,592
  8,104
  8,637
  9,193
  9,774
  10,381
  11,015
  11,678
  12,371
  13,096
  13,855
  14,650
Interest expense (income), $m
  0
  0
  3
  7
  10
  14
  18
  23
  27
  32
  37
  42
  47
  52
  58
  64
  70
  77
  83
  90
  97
  105
  112
  121
  129
  138
  147
  157
  167
  177
  188
Earnings before tax, $m
  981
  1,139
  1,363
  1,600
  1,851
  2,114
  2,390
  2,679
  2,981
  3,296
  3,624
  3,985
  4,340
  4,709
  5,093
  5,493
  5,909
  6,342
  6,793
  7,262
  7,752
  8,262
  8,795
  9,351
  9,932
  10,539
  11,174
  11,838
  12,532
  13,259
  14,020
Tax expense, $m
  245
  308
  368
  432
  500
  571
  645
  723
  805
  890
  978
  1,076
  1,172
  1,271
  1,375
  1,483
  1,595
  1,712
  1,834
  1,961
  2,093
  2,231
  2,375
  2,525
  2,682
  2,846
  3,017
  3,196
  3,384
  3,580
  3,785
Net income, $m
  736
  832
  995
  1,168
  1,351
  1,543
  1,745
  1,956
  2,176
  2,406
  2,645
  2,909
  3,168
  3,438
  3,718
  4,010
  4,313
  4,629
  4,959
  5,301
  5,659
  6,032
  6,420
  6,826
  7,251
  7,694
  8,157
  8,641
  9,148
  9,679
  10,235

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,555
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  6,487
  4,453
  5,008
  5,595
  6,214
  6,863
  7,542
  8,252
  8,992
  9,763
  10,565
  11,399
  12,266
  13,167
  14,103
  15,076
  16,087
  17,139
  18,233
  19,372
  20,558
  21,793
  23,081
  24,424
  25,825
  27,287
  28,814
  30,409
  32,076
  33,819
  35,642
Adjusted assets (=assets-cash), $m
  3,932
  4,453
  5,008
  5,595
  6,214
  6,863
  7,542
  8,252
  8,992
  9,763
  10,565
  11,399
  12,266
  13,167
  14,103
  15,076
  16,087
  17,139
  18,233
  19,372
  20,558
  21,793
  23,081
  24,424
  25,825
  27,287
  28,814
  30,409
  32,076
  33,819
  35,642
Revenue / Adjusted assets
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
Average production assets, $m
  486
  551
  620
  693
  770
  850
  934
  1,022
  1,114
  1,209
  1,308
  1,412
  1,519
  1,631
  1,747
  1,867
  1,992
  2,123
  2,258
  2,399
  2,546
  2,699
  2,858
  3,025
  3,198
  3,379
  3,568
  3,766
  3,972
  4,188
  4,414
Working capital, $m
  2,653
  110
  124
  139
  154
  170
  187
  204
  223
  242
  262
  282
  304
  326
  349
  373
  398
  425
  452
  480
  509
  540
  572
  605
  640
  676
  714
  753
  794
  838
  883
Total debt, $m
  0
  93
  192
  298
  409
  526
  649
  776
  910
  1,048
  1,193
  1,343
  1,499
  1,661
  1,830
  2,005
  2,187
  2,376
  2,573
  2,778
  2,991
  3,214
  3,446
  3,687
  3,939
  4,203
  4,477
  4,765
  5,065
  5,378
  5,707
Total liabilities, $m
  709
  802
  901
  1,007
  1,118
  1,235
  1,358
  1,485
  1,619
  1,757
  1,902
  2,052
  2,208
  2,370
  2,539
  2,714
  2,896
  3,085
  3,282
  3,487
  3,700
  3,923
  4,155
  4,396
  4,648
  4,912
  5,186
  5,474
  5,774
  6,087
  6,416
Total equity, $m
  5,778
  3,651
  4,107
  4,588
  5,095
  5,627
  6,185
  6,767
  7,374
  8,006
  8,663
  9,347
  10,058
  10,797
  11,565
  12,362
  13,192
  14,054
  14,951
  15,885
  16,858
  17,871
  18,926
  20,027
  21,176
  22,375
  23,627
  24,935
  26,302
  27,732
  29,227
Total liabilities and equity, $m
  6,487
  4,453
  5,008
  5,595
  6,213
  6,862
  7,543
  8,252
  8,993
  9,763
  10,565
  11,399
  12,266
  13,167
  14,104
  15,076
  16,088
  17,139
  18,233
  19,372
  20,558
  21,794
  23,081
  24,423
  25,824
  27,287
  28,813
  30,409
  32,076
  33,819
  35,643
Debt-to-equity ratio
  0.000
  0.030
  0.050
  0.060
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.140
  0.150
  0.150
  0.160
  0.160
  0.170
  0.170
  0.170
  0.170
  0.180
  0.180
  0.180
  0.180
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.200
Adjusted equity ratio
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  736
  832
  995
  1,168
  1,351
  1,543
  1,745
  1,956
  2,176
  2,406
  2,645
  2,909
  3,168
  3,438
  3,718
  4,010
  4,313
  4,629
  4,959
  5,301
  5,659
  6,032
  6,420
  6,826
  7,251
  7,694
  8,157
  8,641
  9,148
  9,679
  10,235
Depreciation, amort., depletion, $m
  92
  75
  82
  89
  97
  105
  114
  122
  131
  141
  151
  141
  152
  163
  175
  187
  199
  212
  226
  240
  255
  270
  286
  302
  320
  338
  357
  377
  397
  419
  441
Funds from operations, $m
  1,040
  907
  1,077
  1,258
  1,448
  1,648
  1,858
  2,078
  2,308
  2,547
  2,796
  3,050
  3,320
  3,601
  3,893
  4,197
  4,513
  4,842
  5,184
  5,541
  5,913
  6,301
  6,706
  7,129
  7,570
  8,032
  8,514
  9,018
  9,546
  10,098
  10,676
Change in working capital, $m
  -3
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
Cash from operations, $m
  1,043
  894
  1,063
  1,243
  1,433
  1,632
  1,842
  2,061
  2,289
  2,528
  2,776
  3,029
  3,299
  3,578
  3,870
  4,172
  4,488
  4,816
  5,157
  5,513
  5,884
  6,271
  6,674
  7,096
  7,536
  7,995
  8,476
  8,978
  9,504
  10,055
  10,631
Maintenance CAPEX, $m
  0
  -49
  -55
  -62
  -69
  -77
  -85
  -93
  -102
  -111
  -121
  -131
  -141
  -152
  -163
  -175
  -187
  -199
  -212
  -226
  -240
  -255
  -270
  -286
  -302
  -320
  -338
  -357
  -377
  -397
  -419
New CAPEX, $m
  -54
  -65
  -69
  -73
  -77
  -80
  -84
  -88
  -92
  -95
  -99
  -103
  -107
  -112
  -116
  -120
  -125
  -130
  -136
  -141
  -147
  -153
  -159
  -166
  -173
  -181
  -189
  -198
  -206
  -216
  -226
Cash from investing activities, $m
  -1,279
  -114
  -124
  -135
  -146
  -157
  -169
  -181
  -194
  -206
  -220
  -234
  -248
  -264
  -279
  -295
  -312
  -329
  -348
  -367
  -387
  -408
  -429
  -452
  -475
  -501
  -527
  -555
  -583
  -613
  -645
Free cash flow, $m
  -236
  780
  940
  1,108
  1,287
  1,475
  1,672
  1,879
  2,095
  2,321
  2,556
  2,795
  3,050
  3,315
  3,591
  3,877
  4,176
  4,486
  4,809
  5,146
  5,497
  5,863
  6,245
  6,644
  7,060
  7,494
  7,949
  8,424
  8,921
  9,441
  9,986
Issuance/(repayment) of debt, $m
  0
  93
  100
  106
  111
  117
  122
  128
  133
  139
  144
  150
  156
  162
  169
  175
  182
  189
  197
  205
  213
  222
  232
  242
  252
  263
  275
  287
  300
  314
  328
Issuance/(repurchase) of shares, $m
  538
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  559
  93
  100
  106
  111
  117
  122
  128
  133
  139
  144
  150
  156
  162
  169
  175
  182
  189
  197
  205
  213
  222
  232
  242
  252
  263
  275
  287
  300
  314
  328
Total cash flow (excl. dividends), $m
  322
  872
  1,039
  1,214
  1,398
  1,592
  1,795
  2,007
  2,229
  2,460
  2,700
  2,945
  3,206
  3,477
  3,759
  4,052
  4,358
  4,675
  5,006
  5,351
  5,711
  6,086
  6,477
  6,885
  7,312
  7,758
  8,224
  8,711
  9,221
  9,755
  10,314
Retained Cash Flow (-), $m
  -1,458
  -428
  -455
  -481
  -507
  -532
  -557
  -582
  -607
  -632
  -658
  -684
  -711
  -739
  -768
  -798
  -829
  -862
  -897
  -934
  -972
  -1,013
  -1,056
  -1,101
  -1,149
  -1,199
  -1,252
  -1,308
  -1,367
  -1,429
  -1,495
Prev. year cash balance distribution, $m
 
  2,555
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  2,999
  584
  733
  891
  1,060
  1,238
  1,425
  1,622
  1,828
  2,043
  2,262
  2,495
  2,738
  2,991
  3,255
  3,528
  3,813
  4,109
  4,417
  4,738
  5,073
  5,421
  5,784
  6,163
  6,559
  6,972
  7,403
  7,854
  8,326
  8,819
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  2,875
  535
  638
  734
  821
  898
  963
  1,014
  1,050
  1,071
  1,074
  1,065
  1,041
  1,004
  956
  897
  830
  757
  680
  602
  525
  450
  379
  314
  255
  203
  159
  122
  91
  66
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Intuitive Surgical, Inc. designs, manufactures, and markets da Vinci surgical systems, and related instruments and accessories. The company’s da Vinci surgical System translates a surgeon’s natural hand movements, which are performed on instrument controls at a console into corresponding micro-movements of instruments positioned inside the patient through small incisions or ports. Its da Vinci surgical system include surgeon’s consoles, patient-side carts, 3-D vision systems, da Vinci skills simulators, da Vinci Xi integrated table motions, and Firefly fluorescence imaging products that enable surgeons to perform various surgical procedures, including gynecologic, urologic, general, cardiothoracic, and head and neck surgical procedures. The company also manufactures EndoWrist instruments that include forceps, scissors, electrocautery, scalpels, and other surgical tools, which incorporate wrist joints for natural dexterity for various surgical procedures. In addition, it offers da Vinci Single-Site instruments and accessories that allow surgical systems to work through a single incision; and EndoWrist One vessel sealers that are wristed single-use instruments intended for bipolar coagulation and mechanical transection of vessels up to 7 mm in diameter and tissue bundles that fit in the jaws of the instrument. Further, the company provides EndoWrist stapler, a wristed stapling instrument intended for resection, transection, and/or creation of anastomoses, as well as sells various accessory products, including replacement 3-D stereo endoscopes, camera heads, light guides, and other items that facilitate use of the da Vinci system, as well as sterile drapes for ensuring a sterile field during surgery. It markets its products directly and through distributors in the United States, Europe, Asia, and internationally. Intuitive Surgical, Inc. was founded in 1995 and is headquartered in Sunnyvale, California.

FINANCIAL RATIOS  of  Intuitive Surgical (ISRG)

Valuation Ratios
P/E Ratio 51.9
Price to Sales 14.1
Price to Book 6.6
Price to Tangible Book
Price to Cash Flow 36.6
Price to Free Cash Flow 38.6
Growth Rates
Sales Growth Rate 13.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -12.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 12.9%
Ret/ On Assets - 3 Yr. Avg. 12.3%
Return On Total Capital 14.6%
Ret/ On T. Cap. - 3 Yr. Avg. 14%
Return On Equity 14.6%
Return On Equity - 3 Yr. Avg. 14%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 69.9%
Gross Margin - 3 Yr. Avg. 67.5%
EBITDA Margin 39.7%
EBITDA Margin - 3 Yr. Avg. 34.8%
Operating Margin 34.9%
Oper. Margin - 3 Yr. Avg. 30.5%
Pre-Tax Margin 36.3%
Pre-Tax Margin - 3 Yr. Avg. 31.3%
Net Profit Margin 27.2%
Net Profit Margin - 3 Yr. Avg. 23.9%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 23.7%
Payout Ratio 0%

ISRG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ISRG stock intrinsic value calculation we used $2704 million for the last fiscal year's total revenue generated by Intuitive Surgical. The default revenue input number comes from 2016 income statement of Intuitive Surgical. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ISRG stock valuation model: a) initial revenue growth rate of 13.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for ISRG is calculated based on our internal credit rating of Intuitive Surgical, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Intuitive Surgical.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ISRG stock the variable cost ratio is equal to 35.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $807 million in the base year in the intrinsic value calculation for ISRG stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Intuitive Surgical.

Corporate tax rate of 27% is the nominal tax rate for Intuitive Surgical. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ISRG stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ISRG are equal to 18%.

Life of production assets of 10 years is the average useful life of capital assets used in Intuitive Surgical operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ISRG is equal to 3.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $5778 million for Intuitive Surgical - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 38.943 million for Intuitive Surgical is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Intuitive Surgical at the current share price and the inputted number of shares is $38.3 billion.

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COMPANY NEWS

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▶ Can Intuitive Surgical Hit $1,000?   [11:04AM  Barrons.com]
▶ Intuitive Surgical tops Street 2Q forecasts   [Jul-20-17 09:43PM  Associated Press]
▶ Robot-Surgeon Maker Bests Q2 Sales, Profits Views   [04:40PM  Investor's Business Daily]
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▶ Da Vinci Sp Could Boost ISRG Stock   [Jun-23-17 07:51AM  Market Realist]
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▶ 3 Stocks That Are Long Overdue for a Split   [Jun-21-17 02:43PM  Motley Fool]
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Stock chart of ISRG Financial statements of ISRG
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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