MAKO Surgical Corp. (NASDAQ:MAKO.DL)

CAPS Rating: No stars

Mako makes a robotic surgical system for knee and hip arthoplasty procedures.

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Player Avatar TSIF (99.96) Submitted: 5/23/2011 8:06:14 PM : Underperform Start Price: $31.57 MAKO.DL Score: +6.85

Mako Surgical has had an excellent run the last six months and is a 3 bagger for faithful holding longs. Overall they are gaining analyst and institutional support. Some of the rise is the comparision to Intuitive Surgical which is up 32X since 2003. I'm not sure if the comparision is close and I do understand the value of finding an entry position in a promising equity, but I expect a correction to occur soon. Mako Surgical continues to lose money and while I agree that when Mako Surgical does book a profit that it will be a nice catalyst for the stock, at this point however the P/B of 11.3, P/S of 26 and the negative cash flow do not support the 3X rise. A 26% short position could cause another spike upward should Mako Surgical issue any "surprises", but overall I believe this run is done. It's hard to argue at times with momentum stocks as the top is very difficult to call, but I think the risk/reward is back down on this one. (Estimating sub $22).

Member Avatar HealthcareGuy (99.47) Submitted: 6/30/2011 9:04:02 AM
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2011 or 2012 P/B, P/S, and FCF evaluation is as relevant for MAKO as it is for DNDN, HGSI, or any other early stage biotech company with an approved product with multi billion dollar sales potential that is just starting their launch. Hip replacement is a $6B market, where traditional procedures lack the precision of MAKOplasty, and as a result do not last as long and have inferior users experiences. At just $1.15B EV with a very attractive razor/ razor blade model, MAKO in my estimation is still a multi bagger from here and will most likely not remain public too much longer, as large cap med tech companies have a much larger appetite for M&A than their more talked about big pharma counterparts (who can always hedge themselves by doing sales partnerships instead).

Has MAKO's stock gotten ahead of itself for the near term? Probably. But the only real potential negative catalyst I see here is the announcement from another larger otho company that they will try to enter the robotics space (it will most likely be SYK, if anyone). So given the volatility in the name, you can make good money on both the long and short side depending on the day, fundamentally I still view this stock as cheap, given the scarcity value of the product and market opportunity, and the fast approaching launch of the new Hip application (company has said 2H 2011). Best of luck.

HCG

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