DCF Studio

    ISRG · NMS · Healthcare

    Intuitive Surgical, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 104.37

    Market price

    USD 393.33

    Implied upside

    -73.5%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 10.5% of revenue against depreciation of 6.2%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 37.3x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 104.37-73.5%
    Exit multiple
    USD 273.93-30.4%
    Market price
    USD 393.33

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 11.8bnUSD 13.9bnUSD 16.3bnUSD 19.1bnUSD 22.4bn+17.4%
    EBITUSD 3.2bnUSD 3.7bnUSD 4.4bnUSD 5.1bnUSD 6.0bn+17.4%
    NOPATUSD 2.8bnUSD 3.2bnUSD 3.8bnUSD 4.5bnUSD 5.3bn+17.4%
    Add depreciation & amortisationUSD 737.6mUSD 865.9mUSD 1.0bnUSD 1.2bnUSD 1.4bn+17.4%
    Less capital expenditureUSD -1.2bnUSD -1.5bnUSD -1.7bnUSD -2.0bnUSD -2.4bn+17.4%
    Less increase in working capitalUSD -1.3bnUSD -1.5bnUSD -1.8bnUSD -2.1bnUSD -2.5bn+17.4%
    Free cashflow to firmUSD 950.2mUSD 1.1bnUSD 1.3bnUSD 1.5bnUSD 1.8bn+17.4%
    Discount factor0.94400.84130.74970.66810.5954-
    Present valueUSD 897.0mUSD 938.4mUSD 981.7mUSD 1.0bnUSD 1.1bn+4.6%
    Present Value Of The ForecastUSD 4.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.312Reported 1.465, pulled toward 1.0 (Blume)
    Cost of equity12.21%Risk-free + beta x equity risk premium
    Cost of debt7.00%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 140.9bn100.0% of capital
    Total debtUSD 0.000.0% of capital, book value as a proxy
    Tax rate12.9%Effective, capped at statutory
    WACC12.21%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 104.37

    85% of EV

    Forecast FCFF, final year
    USD 1.8bn
    Capex at depreciation, working capital in reinvestment
    USD 5.4bn
    Less reinvestment at g/ROIC (20.1% of NOPAT)
    USD -1.1bn
    Capitalised
    USD 4.3bn
    ROIC (reported)
    12.5%
    Terminal value, undiscounted
    USD 45.4bn
    Terminal value, discounted
    USD 27.0bn
    Enterprise value
    USD 31.9bn
    Less net debt
    USD -5.9bn
    Equity value
    USD 37.9bn

    Exit at 20.0x EBITDA

    Value per shareUSD 273.93

    95% of EV

    Terminal value, undiscounted
    USD 148.6bn
    Terminal value, discounted
    USD 88.5bn
    Enterprise value
    USD 93.4bn
    Less net debt
    USD -5.9bn
    Equity value
    USD 99.4bn

    Spread between methods: 90%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    10.21%128.64130.36132.24134.33136.67
    11.21%114.71115.65116.65117.73118.90
    12.21%103.48103.92104.37104.84105.31
    13.21%94.7795.0995.4195.7396.05
    14.21%87.5487.8388.1188.4088.69

    Outlined: this model. Green text: above today's price of 393.33. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year17.4%67.5%+50.1pp
    Discount rate12.2%5.2%-7.0pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.