On Jul 4, 2014, we issued an updated research report on Align Technology Inc. (ALGN). Align exited first-quarter 2014 on an encouraging note with both the top and bottom line sailing past the Zacks Consensus Estimate. However, we remain worried about the current economic uncertainty which 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. 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 for its class II and class III patients. Moreover, in Feb 2014, Align launched Invisalign G5 innovations which are specifically used to treat deep bite malocclusion.
According to the company, deep bite is a very common functional orthodontic problem that is present in almost half of the existing orthodontic case starts in North America and approximately a third of the case starts in Asia. With the estimation that deep bite manifests itself in approximately 30% to 40% of the orthodontic cases treated worldwide; we expect greater adoptability of this product down the line.
In the first quarter, international volume increased 31%, reflecting strong growth in both EMEA and Asia Pacific driven by go-to-market and sales coverage investments, improving clinical education, and support and enthusiasm around new products like Invisalign G5.
The company believes that the new features and functionality delivered with Invisalign G4 and G5 are more effective outside North America, especially in Asia, due to the higher complexity of cases observed among the Asian population.We are also encouraged with the company’s new product development.
However, the general slowdown in the U.S. and certain international economiescontinues to weigh on consumer spending and affect Align’s business fundamentals.Competitive landscape also remains challenging.
The stock currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked stocks in the similar sector that are worth a look are AmerisourceBergen Corp. (ABC), Becton, Dickinson and Co. (BDX) and The Cooper Companies Inc. (COO). All the three stocks carry a Zacks Rank #2 (Buy).
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