Nvidia (NASDAQ: NVDA) is the talk of the stock market these days. The artificial intelligence (AI) stock has hit a $3 trillion valuation and it looks unstoppable. But the danger in jumping aboard that bandwagon is that sooner or later, the excitement stops, and you may find out you bought shares near or at the peak.
Investors have fallen into trouble with exciting growth stocks in the past, buying COVID stocks, meme stocks, metaverse stocks, and other thematic stocks only to see those investments falter. Maybe 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 Surgical (NASDAQ: ISRG). You’re still investing in next-gen technologies, and this is a magnificent stock that could have plenty more room to run in the future.
The company’s newest system is AI-ready
Intuitive Surgical makes robotic-assisted surgical systems. This year, it unveiled its latest iteration, the da Vinci 5. It features realistic 3D imaging, improved depth perception, improved ergonomics, and has more than 150 design innovations 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, quicker, 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 benefit from 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 placed eight of the systems during the first quarter.
Procedure growth continues to be strong
A key metric for Intuitive investors is the number of procedures used on its surgical systems. It’s an important metric that helps to gauge the growing popularity of the systems and it’s also a source of revenue for the business. Intuitive makes between $800 and $3,600 per surgical procedure as its instruments and accessories have limited life spans. The surgical systems themselves can cost as much as $3.1 million and many of them end up being leased out.
In Q1, Intuitive reported 11% revenue growth, and the number of da Vinci procedures grew at a rate of 16% year over year. And the growth rate in procedures was 21% in the previous period. It’s a great sign of persistently strong demand for the business.
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 risen by around 60% during that time frame. And the industry is still growing at a fast rate. Analysts from Meticulous Research project that by 2030, the market for surgical robots will be worth more than $25 billion, based on a compound annual growth rate of 15.4%.
The stock isn’t cheap, but can be an excellent long-term buy
At 75 times its trailing earnings, investors are paying a hefty premium for Intuitive’s stock. But with a lot of growth on the horizon and a solid profit margin of 25% last year, this can be one of the best growth stocks you can invest in for the long haul.
Intuitive’s game-changing robotic systems are a great way to invest not only in the healthcare industry’s long-term growth, but also in AI, which is likely to unlock new applications for the systems and potentially make them even more useful for surgeons in the future.
Should you invest $1,000 in Intuitive Surgical right now?
Before you buy stock in Intuitive Surgical, consider this:
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuitive Surgical and Nvidia. The Motley Fool has a disclosure policy.
Forget Nvidia, Buy This Magnificent Growth Stock Instead was originally published by The Motley Fool
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