The Returns At Intuitive Surgical (NASDAQ:ISRG) Provide Us With Signs Of What's To Come
NASDAQ:ISRG), it didn’t seem to tick all of these boxes.” data-reactid=”28″>If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Intuitive Surgical (NASDAQ:ISRG), it didn’t seem to tick all of these boxes.
What is Return On Capital Employed (ROCE)?
If you haven’t worked with ROCE before, it measures the ‘return’ (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Intuitive Surgical is:
See our latest analysis for Intuitive Surgical ” data-reactid=”38″> See our latest analysis for Intuitive Surgical
report on analyst forecasts for the company.” data-reactid=”51″>Above you can see how the current ROCE for Intuitive Surgical compares to its prior returns on capital, but there’s only so much you can tell from the past. If you’re interested, you can view the analysts predictions in our free report on analyst forecasts for the company.
What Does the ROCE Trend For Intuitive Surgical Tell Us?
When we looked at the ROCE trend at Intuitive Surgical, we didn’t gain much confidence. Over the last five years, returns on capital have decreased to 12% from 17% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It’s worth keeping an eye on the company’s earnings from here on to see if these investments do end up contributing to the bottom line.
The Key Takeaway
In summary, Intuitive Surgical is reinvesting funds back into the business for growth but unfortunately it looks like sales haven’t increased much just yet. Yet to long term shareholders the stock has gifted them an incredible 314% return in the last five years, so the market appears to be rosy about its future. However, unless these underlying trends turn more positive, we wouldn’t get our hopes up too high.
FREE intrinsic value estimation on our platform.” data-reactid=”56″>While Intuitive Surgical doesn’t shine too bright in this respect, it’s still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation on our platform.
list here.” data-reactid=”57″>While Intuitive Surgical may not currently earn the highest returns, we’ve compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
Get in touch with us directly. Alternatively, email [email protected].” data-reactid=”58″>This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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