Shares of MAKO Surgical (NAS: MAKO) hit a 52-week low on Wednesday. Let's look at how it got here and see whether dark clouds lie ahead.

How it got here
It's been a rather gloomy couple of quarters for MAKO investors, myself included. Actually, "rather gloomy" doesn't even cut it. It's been downright miserable. Following up a 37% plunge after disappointing first-quarter sales of its RIO system, shareholders were gain taken out to the shed for a 40% haircut this week after second-quarter sales figures also came in soft.

Procedure activity and machine utilization remain healthy, but a lot of MAKO's disruptive story still relies on RIO system sales to deliver all those procedures in the first place. CEO Maurice Ferre said the company is seeing its sales process extend as hospitals are focusing more heavily on making sure they get enough bang for their buck before making the plunge. It's a growing pain that MAKO admittedly needs to mitigate to improve its near-term execution.


The company's disruptive potential had led to some premium valuations after MAKO sold a strong 18 systems in the fourth quarter, but now shares have come fallen with a vengeance, after that potential is being questioned with two quarters of weak RIO sales.

How it stacks up
Let's see how MAKO stacks up with its medical-device peers.

MAKO Chart

MAKO data by YCharts

Let's look at some fundamental metrics for more insight.

Company

P/S (TTM)

Sales Growth (MRQ)

Net Margin (TTM)

ROE (TTM)

MAKO Surgical 6.6 50.8% (40.5%) (35.4%)
Intuitive Surgical (NAS: ISRG) 11.3 27.6% 28.7% 20.7%
Zimmer (NYS: ZMH) 2.5 2.3% 17% 13.2%
Hansen Medical (NAS: HNSN) 6.3 (11.8%) (187%) (118.3%)

Source: Reuters. TTM = trailing 12 months. MRQ = most recent quarter.

MAKO's valuation has plummeted as it tries to disrupt traditional rivals like Zimmer. The biggest fear is that MAKO won't follow in Intuitive Surgical's success and will instead see its devices lose traction,as Hansen Medical's have. It's too early to jump to that conclusion, but that's a scary thought for investors.

What's next?
It's crunch time for MAKO. The next six quarters or so will be pivotal in determining its fate. The release this week only included select operating results and not full financials. It's still finalizing its figures, but I'm going to keep an eye on its cash balance to gauge how long it might have before potentially needing to tap its dilutive financing agreement. If MAKO fails to close these deals next year as it expects to, then further downside could be in store.

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At the time this article was published Fool contributor Evan Niu owns shares of MAKO Surgical, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Intuitive Surgical, MAKO Surgical, and Zimmer Holdings. Motley Fool newsletter services have recommended buying shares of MAKO Surgical and Intuitive Surgical. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

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