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Align (ALGN) Upgraded to Buy on Invisalign System Prospects

Zacks Equity Research

On Apr 11, leading provider of dental and oral care solutions, Align Technology Inc. ALGN was raised to a Zacks Rank #2 (Buy).

We believe the upgrade was primarily driven by Align’s strong share price performance over the last three months. The stock gained 18.1%, which is considerably higher than the 5.1% gain of the Zacks classified Medical - Dental Supplies industry. The company has also recorded a 5-year CAGR of 17.8% for revenues and an impressive long-term earnings growth rate of 20.2%.

The company has been witnessing strong growth at its Invisalign system product line. Align has also undertaken several strategies to drive adoption of the system that includes product development and extending clinical effectiveness of the Invisalign brand. There has been continued adoption of Invisalign in core markets led by the U.K., Spain and France, as well as continued growth in Central Eastern Europe and Nordic markets.

Align’s new iTero Element scanner, which delivered record shipments during the last reported fourth quarter, also witnessed strong demand, resulting in scanner revenue growth of over 100% year over year. These are indicative of the growing popularity of Align’s dental products in the widespread international market and reflect the company’s potential to boost demand for the same in the days ahead.

Align has undertaken several strategies to drive growth in the international market. Management is working on its detailed plan to establish operations in the EMEA region over the next few years such as treatment planning operations in Germany by third quarter 2017 followed by Spain in the first quarter of 2018.

Management also anticipates consistent growth in the Asia-Pacific region. The company has already witnessed robust growth in this region led by China, Japan and Southeast Asia. Align is presently banking on its G6, G7 and other innovation for growth in existing markets.

Additionally, the company has a strong cash balance that enables it to adopt attractive share repurchase programs and in turn provide solid returns to investors.

On the flip side, currency movement continues to hurt growth. Stiff competition and macroeconomic uncertainties continue to impact the company’s dental procedures as well.

Other Key Picks

Other top-ranked stocks in the broader Medical space include Inogen, Inc. INGN, ZELTIQ Aesthetics, Inc. ZLTQ and Hill-Rom Holdings, Inc. HRC. While Inogen sports a Zacks Rank #1 (Strong Buy), ZELTIQ Aesthetics and Hill-Rom carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Inogen gained 52.9% in the last one year, compared with the S&P 500’s gain of 12.6%. The company reported a stellar four-quarter positive average earnings surprise of over 49.08%.

ZELTIQ Aesthetics surged 89.4% in the last one year, compared with the S&P 500’s gain. Its four-quarter average earnings surprise was a positive of 28.75%.

Hill-Rom gained over 31.5% in the past one year, better than the S&P 500 mark. It posted a trailing four-quarter positive average earnings surprise of 12.03%.

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Inogen, Inc (INGN): Free Stock Analysis Report
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