On Dec 31, 2014, we issued an updated research report on Align Technology Inc. (ALGN). Align exited third-quarter 2014 on a positive note with both the top and bottom lines sailing past the Zacks Consensus Estimate. However, we are worried about the current economic uncertainty that continues to cast a negative impact on dental procedures.
Banking on its core product, Invisalign Clear Aligner, Align has established itself as a strong player in the malocclusion market. Over the past few quarters, sales have increased consistently riding on the strength of this product.
The top-line improvement in the quarter was driven by Invisalign case volume growth across all customer channels as well as favorable ASPs from a higher mix of Invisalign full products and a higher mix of international business. In addition, consistent growth in the number of teenagers initiating orthodontic treatment with Invisalign during summer also contributed to the quarter’s performance.
Moreover, several features have been introduced across the Invisalign system, designed to address some of the most significant treatment challenges encountered by doctors. The company’s Invisalign G3 and G4 are working successfully on its class II and class III patients. Moreover, in Feb 2014, the company launched Invisalign G5 innovations that are specifically used to treat deep bite malocclusion.
Scanner and Services revenues increased 7.1% year over year reflecting increased ortho care services, which were offset by a slight decrease in scanner volume. In the reported quarter, Align expanded the workflow options for its iTero intra-oral scanner with Dentsply Implants Atlantis Custom Abutments and Atlantis Custom Abutments.
We are also buoyed by the company’s strong balance sheet and healthy cash flow position. Overall, we believe Align possesses positive potential with management successfully channelizing the three key strategic growth drivers of the company, viz. market expansion, product innovation and brand strength.
However, the general slowdown in the U.S. and certain international economies is creating a negative impact on consumer spending and affecting Align’s business fundamentals. The competitive landscape also remains challenging.
The stock currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Investors interested in the sector can consider stocks like AmerisourceBergen Corporation (ABC), CR Bard Inc. (BCR) and Cardinal Health, Inc. (CAH). All the three stocks carry a Zacks Rank #2 (Buy).
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