On Jan 10, 2017, we issued an updated research report on California-based Align Technology Inc. ALGN, a developer of aligner therapy, intra-oral scanners and CAD/CAM (computer-aided design and computer-aided manufacturing) digital services.
Over the past six months, Align broadly outperformed the Zacks categorized Medical/Dental Supplies industry with respect to price movement. The stock has gained 15.31% as against the broader industry’s loss of 6.97%.
We expect this trend to persist based on several growth drivers including the latest breakthrough – Invisalign G7 – which is successfully working to tap the huge and growing teen orthodontic market.
Geographically, the company remains successful in delivering strong sales growth in North America as well as overseas. In North America, in the last reported quarter, the company observed continued increase in utilization among its orthodontist customers. In EMEA (Europe, the Middle East and Africa), there was a rise in adoption of Invisalign in core markets like Spain and France. Rapid growth was observed from expansion into new markets including Eastern Europe, Benelux, and Nordic regions.
In Asia Pacific, the company witnessed strong volume in China and Japan. Currently, Align is investing nearly $100 million in R&D and marketing to further advance the science and technology for its Invisalign brand. We expect this investment to aid the company expand its business in 2016 and beyond.
In addition, Invisalign Teen continues as the largest growth opportunity, being the prime orthodontic segment of Align on a global basis. In the teen market, the company continues to gain considerable share. Notably, in third-quarter 2016 the company witnessed a 20.5% improvement in global Invisalign cases, displaying continued adoption of Invisalign treatment for teenagers. Specifically, over the past one year, 162,000 teenagers started treatment with Invisalign, an increase of 21% from the prior year.
However, we are concerned about the ongoing economic uncertainty, which casts a gloom on Align’s dental procedures. The competitive landscape also remains a major headwind.
Zacks Rank & Key Picks
Align carries a Zacks Rank #3 (Hold). Better-ranked medical stocks include ICU Medical Inc. ICUI, Conatus Pharmaceuticals Inc. CNAT and NanoString Technologies, Inc. NSTG. ICU Medical sports a Zacks Rank #1 (Strong Buy) while NanoString Technologies and Conatus Pharmaceuticals Inc. carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ICU Medical gained 36.5% over the last one year compared with the S&P 500’s 17.9% growth. The company has an impressive earnings growth expectation of 20.5% for the next five years compared with the industry average of 15.2%.
NanoString Technologies surged 81.6% over the past one year, better than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 6.9%.
Conatus Pharmaceuticals Inc. rallied 173.26% in the past one year, way better than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 12.5%.
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