ISRG is a high-quality company with a strong business model, but faces headwinds from slowing growth and expensive valuation.

Intuitive Surgical is one of the biggest medical equipment makers in the world. It's considered one of the highest quality companies in the world. It's still growing fast, but the stock price is going down.

Now, next up we have Intuitive Surgical. This is a company that I've historically avoided because it's in the medical field, and like most things in the medical field, it's very difficult to understand the industry, there's lots of regulations, there's lots of red tape, and it seems overall like a difficult industry to invest in.

But Intuitive Surgical has a very unique business model within the medical field, and I actually believe it's a very, very good business model.

But Intuitive Surgical is in a decline, like the stocks are outlining here, this one has been really crushed over just the year-to-date period, it's down 36%. We go to the one year, down 23%, completely flat on the five years.

We go to 10 years and we see more of a long-term trend. And this is where this one gets interesting. Intuitive Surgical at a glance seems like a high-quality stock where investors got a little too excited, a little ahead of themselves, but now investors, those same investors are pulling back. The momentum has faded.

Now, this one's a bit different than Lululemon. It doesn't trade anywhere near the low valuation of Lululemon. So, for example, it trades at a 31 forward PE ratio. That's still a premium PE ratio, but it's no longer crazy.

The PE ratio was in the 50s and 60s before, now it's come down to a more reasonable premium PE ratio. We also have a free cash flow yield of only 2.56%. So, this isn't Lululemon where it's trading at a 10 PE and a 12% free cash flow yield.

It's much more expensive, but it's also not Lululemon where this company is no longer growing revenue.

If we look at the analyst expectations this next quarter, it's expected to grow at 12% and then over the next year, it's expected to grow at 13%. And I think that's part of the problem.

Is it was just growing at 20%, now it's expected to grow at roughly 13%. So, there is deceleration and that's what's concerning a lot of investors. They believe that this company has gotten to a point of more saturation and slower growth, so that high-flying valuation needs to come down.

Now, Intuitive Surgical is a very interesting company. It's one that I started to study and I plan on doing a deep dive into, but for now I'll just give you a basic rundown of what this company does.

I view it as a printer and the ink type of company. You know you need to buy a printer. It's not too expensive, you just get the printer in your home, but then you realize it runs out of ink.

And then you have to buy ink and the ink is very expensive. And that's basically what this company does. The printer in this case are surgical devices that they sell to hospitals.

Once they sell them to hospitals, the surgical devices require a lot of tooling and a lot of disposable things. They're one-use things. So, the company starts by selling a surgical device to either a clinic, a hospital, or any type of medical system.

They buy that and that's some of the revenue. So, they make money on the sale, but that's really not where they like to make most of their money. The biggest portion of it comes from instruments and accessories.

These are things that they have to use new that are compatible with the surgical equipment or with the system every single time they do a surgery. So, every time they're using it, they're running through that ink from the printer.

That's the instruments, that's the accessories. But, then there's a third thing. This is as if the printer itself has to be serviced every once in a while to continue working. These systems are complex, sometimes they break down, and they're the ones that service the systems.

So, you also have service revenue as well. So, basically, everything relies initially on getting systems installed. Once you have the system installed, then you have the instruments and accessories, then you have the services.

We have another KPI that tracks their ongoing system installations. Now, this is not the total systems installed, this is how many new that they're installing every single year.

On a trailing 12-month basis, they've installed 2,000 new systems. All of those require constant parts every surgery and constant maintenance. So, this is overall a very good business model of a company that continues to have its stock decline.