Exploring promising stocks during a bullish market has its challenges, notably the scarcity of substantial discounts. Nonetheless, the key lies in identifying companies with strong long-term potential. Two compelling options worth considering are Intuitive Surgical (NASDAQ: ISRG) and DexCom (NASDAQ: DXCM). Allocating $1,000 to either (or both) of these companies could prove to be a wise investment. Let’s delve into the reasons supporting this strategic move.
1. Intuitive Surgical
Intuitive Surgical stands out as a cutting-edge medical device company celebrated for its da Vinci System, a revolutionary robotic-assisted surgery (RAS) device. The da Vinci System empowers surgeons to conduct minimally invasive procedures through small incisions and precision-manipulated tiny instruments. This approach offers distinct advantages, such as reduced scarring, quicker recoveries, and shorter hospital stays compared to traditional open surgeries.
Despite these advantages, only a small percentage of procedures that could benefit from robotic assistance have been adopted, signaling significant growth potential for Intuitive Surgical. The company concluded 2023 with an installed base of 8,606 da Vinci systems, showcasing a robust 14% year-over-year increase.
Financially, Intuitive Surgical posted impressive figures, with revenue reaching $7.1 billion, marking a 14.5% YoY increase. Adjusted earnings per share (EPS) also demonstrated a strong surge, reaching $5.71, a remarkable 22% jump compared to 2022. While the company faced challenges, including pandemic-related procedure volume declines and the impact of weight-loss medicines on demand for related surgeries, these hurdles are unlikely to significantly affect its long-term trajectory.
The pandemic-induced disruptions were an anomaly, and Intuitive Surgical has rebounded swiftly. The temporary setback merely created a backlog of elective surgeries, emphasizing procedures that can be scheduled in advance rather than being optional. Notably, the rise of GLP-1 medicines like Ozempic may influence weight-loss surgeries, constituting 4-5% of total procedures globally. However, given the vast untapped potential in the RAS market, this impact remains manageable over the next decade and beyond.
Having outperformed the market in the past decade, Intuitive Surgical’s resilience positions it well for continued success. With $1,000, investors can acquire two shares of this forward-looking company, with ample change to spare.
2. DexCom
DexCom, a key player in the medical device industry, specializes in developing solutions for diabetes patients. The company’s lineup of continuous glucose monitoring (CGM) systems provides real-time tracking of blood sugar levels, offering a more user-friendly alternative to traditional blood glucose meters. Notably, DexCom’s G6, a flagship product, delivers measurements as frequently as every five minutes, a stark contrast to the manual operation and pain associated with traditional methods.
The growing popularity of CGM devices is evident, driven by their convenience and positive impact on diabetes patients’ health outcomes. As one of the leaders in the CGM space, DexCom experienced robust financial growth, with last year’s revenue reaching $3.62 billion, reflecting a notable 24% year-over-year increase. The adjusted EPS of $1.52 also surged by 74.7% compared to the previous fiscal year.
Despite concerns about the impact of weight-loss medicines on DexCom’s business, the argument suggesting decreased demand for CGM devices is likely misplaced. DexCom asserts that physicians often prescribe GLP-1 therapies in conjunction with CGM devices for optimal results. These products complement each other, contributing to enhanced health outcomes for diabetes patients.
DexCom’s future appears secure, especially considering the vast global diabetic population exceeding half a billion, of which only 1% currently utilizes CGM devices. While a significant portion of this demographic remains untapped, particularly in developing countries, DexCom has initiated steps to broaden its reach. In 2023, the company successfully entered the Latin American market through Argentina.
With substantial growth potential even within its existing addressable market, including the relatively saturated U.S. CGM sector, DexCom is poised to ride the CGM revolution for years to come. Expecting robust returns along this journey, investors can secure eight shares of the company with a $1,000 investment at current levels.
