Robohub.org
 

Intuitive Surgical, a manufacturer with almost no tangible assets?

by
01 May 2013



share this:

IntuitiveIntuitive Surgical (NASDAQ:ISRG) is a prime example of how robotics is similar to other IP intensive industries like software, biotech, and entertainment.

In December my colleagues and I produced a valuation of Intuitive Surgical.  Below is a representation of our model of the asset structure of Intuitive Surgical in our forecast.  Whether you agree with our estimate of a 31% return on economic assets or not (though the stock market roughly seems to), this chart is very instructive to look at what the economic assets of a successful robotics firm are.

And hey, guess what?!  Intuitive looks more like a software company than a traditional manufacturer.  Strike another blow for the case that robotics companies – at least successful ones – are capital efficient!

Moreover, if I was critiquing the model in the valuation I would say that we hadn’t adequately valued the intangible assets of Intuitive Surgical.  The intangible assets of the firm probably have a market value of 2-8 times what we estimate.  Even with our conservatism, look at what you’re buying into when you buy a share of Intuitive:  A $2Bn stack of cash, a multi-billion dollar IP portfolio, and a smallish medical device manufacturing company.

Assumptions of FCF forecast through an economic view

[How to read this chart:  Black is our estimate of “R&D assets” in $K so starting balance is just shy of $2Bn.  Red is GAAP non-financial assets, otherwise know as real stuff, like buildings, inventory, and accounts receivable.  Grey is our estimate of financial assets with the current dividend policy–this model posits that Intuitive will be sitting on $4Bn in cash or the like in 2016 and an IP portfolio equally as large and valuable.Return on economic assets was estimated using our income forecast over capitalized R&D spending in the R&D account plus assets less cash and securities.  The model has a depreciation factor for R&D each year to account for obsolescence and expiration.  We went back several years to estimate an appropriate R&D account starting balance for the projection.]

The stock market assigns a $20Bn valuation to Intuitive.  It recognizes that Intuitive’s control of  intangible assets is very valuable. The graph of the model here only scratches the surface of intangible assets.  We assumed that the only off balance sheet economic asset was an R&D account.  Clearly, this is not the case as Intuitive Surgical also has unique and valuable organizational processes, sales relationships, and employment relationships with talented employees but those are much harder to find information about in SEC disclosures.    Similarly, we also marked R&D at cost–with a portfolio as valuable as Intuitive’s the market is probably going to value the R&D output at more than Intuitive paid to develop the R&D assets.

Even with all this, Intuitive Surgical looks like lean, mean, capital efficient, IP intensive, knowledge economy company.  Can anyone tell me why we let people talk about robotics like it is capital intensive?

I’d like to gratefully acknowledge my co-authors of this report who have given me permission to publish it: Avinash Belur, Naohiro Furuta, Masayuki Minato, Kohei Mutoh, & Dashampreet Sidhu.  Analysis available by request.



tags: ,


Robert Morris is founder and CEO of the aerial imaging start-up TerrAvion. He is also the author of the blog robocosmist.com
Robert Morris is founder and CEO of the aerial imaging start-up TerrAvion. He is also the author of the blog robocosmist.com





Related posts :



Interview with Dautzenberg Roman: #IROS2023 Best Paper Award on Mobile Manipulation sponsored by OMRON Sinic X Corp.

The award-winning author describe their work on an aerial robot which can exert large forces onto walls.
19 November 2023, by

Robot Talk Episode 62 – Jorvon Moss

In the latest episode of the Robot Talk podcast, Claire chatted to Jorvon (Odd-Jayy) Moss from Digikey about making robots at home, and robot design and aesthetics.
17 November 2023, by

California is the robotics capital of the world

In California, robotics technology is a small fish in a much bigger technology pond, and that tends to conceal how important Californian companies are to the robotics revolution.
12 November 2023, by

Robot Talk Episode 61 – Masoumeh Mansouri

In the latest episode of the Robot Talk podcast, Claire chatted to Masoumeh (Iran) Mansouri from the University of Birmingham about culturally sensitive robots and planning in complex environments.
10 November 2023, by

The 5 levels of Sustainable Robotics

Robots can solve the UN SDGs and not just via the application area.
08 November 2023, by

Using language to give robots a better grasp of an open-ended world

By blending 2D images with foundation models to build 3D feature fields, a new MIT method helps robots understand and manipulate nearby objects with open-ended language prompts.
06 November 2023, by





©2021 - ROBOTS Association


 












©2021 - ROBOTS Association