Is Align technology a purchase?

If orthodontics seems like a boring field to invest in, you probably haven’t heard of it Alignment technology (NASDAQ:ALGN).

Far from being a dental supply company, Align’s core business is its transparent Invisalign tooth straightener, which helps people improve their smile in more fashionable and comfortable ways than traditional straightening solutions. like braces.

And where there is disruption of an old paradigm with a new one, there is money to be made for those willing to invest, which is exciting.

Image source: Getty Images.

There’s a lot to love about this stock

The key to appreciating Align’s value as a company is understanding why its Invisalign product is so much better than traditional alternatives.

Rather than enduring arduous sessions at the orthodontist to install, adjust and eventually remove straighteners, patients get their teeth imaged by the company’s 3D scanners. Then, the clinician molds a transparent aligner body to the shape of his chompers but adjusted to the corrections that the person needs. After that, the patient wears their personalized aligner, easily removing it when they need to eat or drink.

Eventually, they have a smile closer to the aesthetic they prefer. And the ease and attractiveness of the whole process makes the business rich.

Last year, he sold around 55% more of his Invisaligns than in 2020, generating almost 60% more net income. For 2021, its total take was $3.9 billion, with an astonishingly high $705.5 million coming from sales of imaging systems and software services rather than aligners. And management is betting that net sales will grow by up to another 30% in 2022, which it says matches the company’s long-term average growth rate.

There are a few reasons to believe that the confidence of the management team is well placed. One particularly handy capability that will allow this company to grow more than it otherwise could is its digital experience for potential and current patients.

If someone wants to know if their teeth can be straightened with Invisalign, all they have to do is download the MyInvisalign app and upload a photo of their smile. From there, they’ll get guidance on whether they should ask for a practitioner referral – and if so, the app helps them find local practitioners. After that, everything from booking appointments to arranging insurance coverage and virtual follow-ups is handled by the app.

Reducing the friction of selecting and onboarding new customers is an important competitive advantage, though others may seek to emulate it over time. The app also has a powerful tool that lets people see a computer-generated image of what their smile might look like after their treatment is complete. When it comes to advertising techniques, it’s hard to imagine better.

Additionally, with a market share of approximately 10%, Align is strongly positioned to continue its global expansion, which it views as a strategic priority. Last year, it sold 69.5% more cases of its straighteners to customers in Europe, the Middle East and Africa, and it is currently building a new global manufacturing center in Poland to meet strong demand. .

Headwinds are rare

There are no recurring bugbears or major looming threats investors need to be aware of with Align Technology stocks at this time, but there are a few things.

In particular, its operating margin may continue to come under some pressure, as it did more recently in the fourth quarter, when it fell from 25.7% to 21.4%. Management cites foreign exchange losses and additional spending on marketing and research and development (R&D). The extra spending will help drive growth, so that’s not alarming.

Similarly, investors would do well to note that the company performed exceptionally well in 2020, which makes 2021 net profit growth seem weak by comparison. It turns out that over the past five years, Align’s annual net income has grown by 234%, and there’s no sign of the favorable trend waning; nor is there any reason to think that it will be the case anytime soon.

In my opinion, Align is a great stock to buy this year for investors looking for growth. But know that he has been particularly affected by the ongoing drama surrounding the Federal Reserve’s plans to raise interest rates, like most growth stocks. So it might not beat the market, at least for now.

10 stocks we prefer to Align Technology
When our award-winning team of analysts have stock advice, it can pay to listen. After all, the newsletter they’ve been putting out for over a decade, Motley Fool Equity Advisortripled the market.*

They just revealed what they think are the ten best stocks investors can buy right now…and Align Technology wasn’t one of them! That’s right – they think these 10 stocks are even better buys.

View all 10 stocks

* Equity Advisor Returns as of March 3, 2022

Alex Carchidi has no position in the stocks mentioned. The Motley Fool owns and recommends Align Technology. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.
Back to top button