What Makes Align Technology (ALGN) a Solid Choice Right Now?

Align Technology, Inc. ALGN manufactures and markets a system of clear aligner therapy, intra-oral scanners and CAD/CAM (computer-aided design and computer-aided manufacturing) digital services. The company’s Invisalign Clear Aligners and iTero scanners saw impressive sales in the last-reported first quarter of 2021. The market is optimistic on the impressive international performance across geographies and increased shipment volumes.

Over the past year, this Zacks Rank #2 (Buy) stock has gained 125% compared with 28.6% growth of the industry and 38.7% rise of the S&P 500 composite.

The renowned global medical device company has a market capitalization of $48.81 billion. Its first-quarter 2021 earnings surpassed the Zacks Consensus Estimate by 25.13%.

Over the past five years, the company registered earnings growth of 60.1%, way ahead of the industry’s 10.6% rise and the S&P 500’s 2.8% increase. The long-term expected growth rate of 23.2% also exceeds the industry’s growth projection of 13.1%.

Let’s delve deeper.

Key Drivers

Invisalign Portfolio Expansion: Investors are optimistic about the advancements rolled out by the company for the Invisalign portfolio. Invisalign adoption among adults rose 5.8% sequentially and 68.5% year over year in the last-reported first quarter. Recently, the company announced the commercial and global availability of the Invisalign G8 with SmartForce Aligner Activation and ClinCheck Pro 6.0, respectively. The company also released My Invisalign app and Virtual Care in various countries. Other notable offerings include the Steraligner aligner cleaning system, Invisalign Stickables and limited-edition Charli D’Amelio x Invisalign Aligner Case.

iTero in Focus: Investors are looking forward to the expanding work flow options of its leading iTero scanners. Few notable developments in the iTero family include extended relation with DECA Dental Group following a new multi-year agreement for the Invisalign system, launch of the iTero Element Plus Series of next generation of intraoral scanners and imaging systems, and others. Align Technology continued to benefit from exocad CAD/CAM products and services revenues during the first quarter.

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Strong Solvency Position: Align Technology exited the first quarter of 2021 with cash and cash equivalents of $1.13 billion and no reported debt on its balance sheet, implying strong cash balance.

Upbeat 2021 Guidance: During its last earnings call, the company raised its financial outlook for 2021. The company expects revenues for the year within the range of $3.7-$3.9 billion, indicating a surge of 50-58% from 2020.

Downsides

Tough Competition: Align Technology faces significant competition from traditional orthodontic appliance (or wires and brackets) players such as 3M’s Unitek, Danaher Corporation’s Sybron Dental Specialties and Dentsply International. Stiff competition from products similar to Invisalign Technology persists.

Economic Uncertainty: The current macroeconomic environment across the globe has affected Align Technology’s business fundamentals. The company’s waning earnings is attributable the macro economic crisis that affected the overall dental market. Further, the recent coronavirus outbreak has led to an unstable economic condition for the company.

Estimate Trend

Align Technology has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 14.2% to $10.53.

The Zacks Consensus Estimate for its second-quarter 2021 revenues (slated to be reported on Jul 27) is pegged at $937.52 million, suggesting a 166.1% surge from the year-ago reported number.

Zacks Rank and Other Key Picks

A few other top-ranked stocks from the Medical-Dental Supplies industry include Henry Schein, Inc. HSIC, Laboratory Corporation of America Holdings LH and West Pharmaceutical Services, Inc. WST, each sporting a Zacks Rank #2.

Henry Schein has a long-term earnings growth rate of 11.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Laboratory Corporation has a long-term earnings growth rate of 10.6%.

West Pharmaceutical has a long-term earnings growth rate of 25.8%.

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