Invisalign: Something to Smile About

08/18/2016 7:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

With 13 previous appearances in our service, this company is no stranger to growth investors, notes Mike Cintolo, editor of Cabot Top Ten Trader.

The entire business at Align Technology (ALGN) is based on its clear plastic aligners that straighten teeth like metal braces, but without the “metal-mouth” effect.

The company’s products include a 3-D computer modeling system and other services, but 95% of revenue still comes from the aligners, which are changed every two weeks as teeth move toward their desired location.

While shipments of Invisalign appliances to orthodontists have been leading the way in US growth, the international market is the real growth driver; the Q2 report showed 38% growth outside the US, compared to 15% growth inside the country.

The company has also just kicked off consumer campaigns in China, Australia and New Zealand, and is continuing awareness campaigns in Hong Kong and Japan.

Treatments for adults are another source of growth, with growth in adult cases outrunning teens by 35% to 19%.

Despite a highly competitive environment, Align Technology is continuing its strong growth, and projected earnings growth is 34% in 2016 and 26% in 2017.

The strength of the company’s novel product line and the skill of management in growing internationally looks set to drive further growth at Invisalign.

The Q2 earnings report gave the stock a new burst of energy on July 29, when it soared to $89 on huge volume.

With the stock now trading around $92, it’s reasonable to expect some kind of consolidation or correction. Try to get in on a pullback of a couple of points and use a loose stop at the 50-day moving average, now at $82.

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By Mike Cintolo, Editor of Cabot Top Ten Trader

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