Why Investors Are Paying a Premium For Intuitive Surgical

Intuitive Surgical (NASDAQ: ISRG) is currently facing headwinds. Because healthcare systems worldwide are focusing their resources on the fight against COVID-19, many elective surgeries have been delayed or postponed. As a result, Intuitive Surgical's top line could take a hit in the coming quarters. This may explain why the company is performing slightly worse than the stock market so far this year, down 13.6% to the S&P 500's 11.8% decline. Despite its recent slump, though, Intuitive Surgical isn't cheap; its price-to-earnings (P/E) ratio is in line with its peers at 44, while its price-to-earnings-growth (PEG) ratio is 2.1, reflecting a generous valuation.

Is Intuitive Surgical worth the premium? I believe it is, and here's why.

First, it is worth comparing Intuitive Surgical's performance with that of the broader market over the years. The company's IPO was back in 2000 -- ancient history in the stock market -- and Intuitive Surgical has vastly outpaced the market since then. 

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Source Fool.com