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Align
Technologies Inc (ALGN)
Align
technologies has been on the momentum
radar since they reported Q4 2011 earnings of 28 cents, topping the
Zacks
Consensus Estimate of 22 cents. Q4 2011
EPS results represented a 100% increase over the same period in
2010.
For the year, Align’s earnings of 97 cents,
surpassed the Zacks Consensus Estimate of 90 cents as well as the
year-ago
adjusted EPS of 80 cents.
The
company beat the street again last
week, reporting Q1 2012
EPS of 26 cents, 30% higher than the year-ago period. Adjusted EPS came
in at
27 cents, beating the Zacks Consensus Estimate of 22 cents as well as
the
year-ago quarter adjusted EPS of 21 cents. The adjusted EPS also
surpassed the
company’s guidance range of 19−21 cents.
All in all, it was a very good 2011
for the orthodontics and technology manufacturer, whose products have
now
helped over 1.5 million patients around the world.
Early
2012 seems to be looking like a continuation
of this strength.
But it’s not just about invisible braces;
ALGN is growing their imaging / scanning segments as well. A
recent acquisition may help propel this
growth into the coming quarters.
Company
Description & Developments
Align Technology is headquartered in San Jose, California with offices
worldwide. Align was founded in 1997 and
received FDA clearance in 1998 and began its first commercial sales of
Invisalign to U.S. orthodontists in 1999. In 2000, they had already
begun mass
marketing in the U.S. and a year later introduced Invisalign to the
European
market. By late 2001, Align had
manufactured one million unique clear aligners.
The Invisalign system is offered in more than 45 countries and
has been used
to treat more than 1.5 million patients.
In 2011, ALGN acquired Cadent Holdings, Inc., which was a
leading provider
of 3D digital oral scanning. The Cadent deal added
the iTero and iOC
scanning systems to the Align portfolio and fit well with their
system.
Intra-oral scanning systems provide a dental
“chair-side” platform for accessing valuable digital diagnosis and
treatment
tools, with potential for enhancing accuracy of records, treatment
efficiency,
and the overall patient experience.
Maybe it will replace that nasty resin used to create impressions of
your teeth!
Their scanning technology is available in over 20 countries
and uses open
architecture systems which allow for compatibility with multiple
laboratory-based CAD/CAM milling systems and 1,200 dental labs.
Financial Profile
ALGN is a small-cap (2.52 billion) company that is trading at about 28
times forward
(expectations for next quarter) earnings.
ALGN
became a Zacks Rank 1 Strong Buy
on April 26th, after their strong results on April 25th.
The
services company reported a
quarterly sales increase of 5 % at their last earnings report, but saw
a 3.5% decline
in EPS growth for the same period. At their last report,
Align
Technologies recorded 33.7% of the total Invisalign Clear Aligner sales
from
North America orthodontists (up 19.1% year over year to $41.6 million),
36.6%
from North American GP Dentists (up 15.1% to $45.2 million), 24.1% from
international (up 17.9% to $29.7 million) and 5.5% from non-case
revenues (up
24.6% to $6.8 million).
ALGN
is expected to earn $1.12 in
FY2012 according to the Zacks Consensus Estimate.
Earnings Estimates
Given the uncertain economic climate, Align still offer a strong
outlook for Q2
FY2012. The company expects net revenue in the range $140.2−$143.7
million, which
was higher than the Zacks Consensus Estimate of $136 million. The
company
expects adjusted EPS in the range of 26−28 cents, which was above the
Zacks
Consensus Estimate of 24 cents at the time.
In
the past couple days; Zacks Consensus
Estimates have increased to 28 cents for Q2 given the strong results
and growth
prospects. Of the 11 analysts who cover ALGN,
the consensus is for the company to grow earnings by 15.5% in the
current year
(FY2012) and roughly 17.9% in FY2013.
In terms of the magnitude of analyst estimate trends, we are
seeing all of
the consensus estimates higher than they were just 7 days ago for the
current
and next quarters as well as FY2012 and FY2013.
Market Performance &
Technicals
It’s like technical Groundhog Day for most of our momentum stocks and
ALGN is
no exception. Since bottoming out in October,
the shares have marched slowly higher over the past 6 months or so.
The
50 day moving average crossed
above the 200 day back in mid-December 2011 and ALGN has maintained
position
above that 50 day ever since, with a few breaches here and there.
The
stock is now firmly above its 50
and 200 day moving averages of $27.58 and $22.80
respectively.
ALGN seems to consolidate for a while and
then breakout or gap higher. These
consolidation periods can last a couple weeks, so it’s best to get long
shares
closer to the bottom of the channel to get the edge.
Look for the $31.00 level to act as support
in this recent gap.
ALGN
has exceeded the S&P 500’s
performance by 25.5% in the past year and almost 18% in the past 3
months. The gap up on earnings put ALGN ahead of the
S&P by over 12% in the past 30 days alone.
Momentum should be on this stock’s side, but it’s important to realize
that expectations are also on the rise and ALGN will have to deliver if
shares
are to perform as they have done in the past year.
Jared
A Levy is the
Momentum Stock Strategist for Zacks.com. He is also the Editor in
charge of the
market-beating Zacks
Whisper Trader Service.
ALIGN TECH INC (ALGN): Free Stock Analysis Report
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