Editing Intuitive Surgical, Inc. (section)

== Finances ==
[[File:ISRG UFCF Projections.png|thumb|1226x1226px|center]]

Some key assumptions were made for forecasting these line items from 2023 onwards. Revenue was grown at the mean value of the CapitalIQ analyst projections. COGS (35%), EBITDA (38%), depreciation (4%) and capital expenditure (6%), were either forecasted at a 7-year average percentage of revenue excluding 2020 and 2021 or if more applicable the mean value of CapitalIQ analyst projections. Tax was estimated as a percentage of EBIT and was thereafter forecasted at 20%, being the general forecast consensus.

[[File:ISRG WACC.png|thumb|center]]

[[File:ISRG Terminal Value.png|center|thumb|339x339px]]

The weighted average cost of capital (WACC) is used as the discount rate in the DCF model, as free cash flows to the firm (FCFF) are used to calculate the enterprise value of the firm. The cost of equity (11.8%) was calculated using the capital asset pricing model (CAPM). The risk-free rate (4.084%) was assumed to be the U.S. 10 Year Treasury. The beta (1.3) is the 5-year monthly historical beta of ISRG according to Yahoo Finance. The market return (9.89%) is taken to be the 30-year average return of the NASDAQ, where ISRG is listed. While the 30-year average can be argued to be extensive, a more conservative valued seemed appropriate considering the 17% 5-year AAR and 14.8% 10-year AAR. The cost of debt (0%) was calculated as the company has no interest expense despite the $95 million in debt. This maybe due to ISRG having no debt till 2020 where total debt was reported as $80 million (2020), $87 million (2021) and $95 million (2022).

[[File:ISRG DCF.png|thumb|732x732px|center]]
[[File:ISRG Sensitivity.png|thumb|728x728px|center]]


Having completed a forecast and calculated the WACC, the DCF method was implemented to arrive at an enterprise value of $24,058,196,080. The terminal value was calculated using a perpetual growth rate of 2%, which is estimated to be in line with US’s future GDP growth rate. After discounting the cash flows using the WACC and arriving at an enterprise value, an equity value of $28,085,096,080 was then estimated. Thereafter, an implied share price of $80.40 was calculated by dividing the equity value by the number of shares outstanding (351 million shares). Based on this valuation and relative to the actual share price of $305.32, ISRG would be viewed as being overvalued.