Align Technology (ALGN) is best-known as the developer and marketer of the Invisalign System, a proprietary method for straightening teeth, explains Hilary Kramer, a leading growth stock expert and editor of GameChangers.

You’re likely familiar with the traditional orthodontics treatments for correcting mal-positioned teeth that utilize metal wires and brackets. The Invisalign System, on the other hand, uses its propriety software to develop a series of patient-specific, nearly invisible, plastic removable aligners. The Invisalign System is provided by trained orthodontists and general practitioner dentists.

The popularity of Invisalign is demonstrated clearly in the numbers. From humble beginnings with only five employees working in a small duplex in Redwood City, California in 1997, Align Technology expanded exponentially, treating hundreds of patients, training thousands of doctors and manufacturing over one million clear liners by 2001.

The company hasn’t rested on its laurels, though, as it’s continued to improve aligner materials, software algorithms and 3D Force Systems, all with the primary goal of providing a better patient experience. More than 10.9 million people have benefited from the Invisalign System.

Now, Align Technology is far from a one-trick pony, as its Clear Aligners are not the only avenue to future growth. ALGN’s Imaging Systems and CAD-CAM Services division’s revenues grew 61.3% in the fourth quarter and accounted for 18% of total revenues for all of 2021.

This division has its origins from ALGN’s 2011 acquisition of the iTero intraoral scanner. The scanner allows the dental practitioner to create a 3D image of a patient’s teeth through a handheld device that makes scanning faster, more precise and comfortable for the patient.

The scanner can be used with software for both orthodontic and restorative procedures. More than 40.1 million orthodontic and 8.4 million restorative scans have been performed globally. And ALGN keeps expanding the functionality of the system, adding 5D imaging in 2019 and CAD-CAM software in 2020.

COVID temporarily interrupted Align Technology’s growth trajectory in 2020, but the company quickly regained lost ground in 2021. I believe current estimates for 22% revenue growth to $4.77 billion and EPS of $12.54 may be too conservative.

The stock has fallen significantly in the recent correction in growth stocks, down over 30% from a high of $726 in September. However, its valuation is now reasonable at 32.5X 2023 EPS estimates. Given the company’s two strong growth engines, EPS should expand in excess of 20% a year for the foreseeable future.

In addition, the company has very strong financial metrics, with strong cash flow generations and gross margins in excess of 70%. So, I believe the recent decline in the shares offers an opportunity to buy ALGN at bargain prices. Buy ALGN below $520. My target is $600.

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