Medical oral care specialist Align Technology (ALGN) is known for its diverse portfolio of dental scanners and clear aligner orthodontics. The stock has maintained its momentum over the past year, despite the pandemic, as the market expected regarding a quick recovery of the medical and orthodontics industry. ALGN has gained 123% over the past twelve months, and 15% year-to-date.
Most elective surgeries and non-emergency checkups were postponed during the first half of 2020 because of social distancing restrictions and fear of contracting the virus. However, the mass vaccination drive and the COVID-19 infection rate dropping to the lowest level in months has driven people to reschedule their previously cancelled appointments.
The rising demand for orthodontics medical services have been driving ALGN’s growth over the past couple of months. Factors that should accelerate ALGN’s rebound are:
Record Quarterly Results
ALGN’s revenues have increased 28.4% year-over-year to a record of $834.50 million in the fourth quarter ended December 31, 2020. This can be attributed to a 28.9% rise in revenues generated by the Aligner segment, and 26% rise in revenues from the Imaging systems and CAD/CAM services segment. Clear aligner volume rose 37.3% from the same period last year to 568,000 cases. Non-GAAP net income has risen 31.1% from the prior-year quarter to $158.99 million, while EPS increased 30.7% from the year-ago value to $2.
Following the release of the quarterly financial results on February 3, 2021, ALGN hit its all time high of $634.46 when the markets opened on February 4.
Impressive Growth History and Profitability
ALGN’s revenues have increased at a CAGR of 18.8% over the past three years, while net income rose at a CAGR of 97.3% over this period. The company’s EPS and leveraged free cash flow have risen at CAGRs of 99.3% and 57.7% over the past three years.
ALGN’s trailing 12-month gross profit margin of 71.33% is 27.5% higher than the industry average of 55.94%. Leveraged free cash flow margin of 23.74% is significantly higher than the industry average of 2%.
Moreover, the company’s net income, ROE and ROA of 71.84%, 77.55% and 36.77% compare favorably with negative industry averages.
Consensus Price Target and Ratings Reflect Potential Upside
Currently trading at $614.21, analysts expect the stock to gain slightly to hit $610 soon. The stock has an average broker rating of 1.53, reflecting favorable analyst sentiment. Out of 16 Wall Street analysts that rated the stock, 6 rated it Strong Buy, and 10 rated it Buy.
Favorable POWR Ratings
ALGN has an overall rating of B, equating to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
POWR Ratings evaluates each stock on a total eight different categories. ALGN has a grade of A for Sentiment, and B for Quality. This is justified, as the stock enjoys favorable analyst sentiment, given its sturdy financials and profitability.
Better than ALGN: There are 17 stocks in the Medical – Devices & Equipment industry with an overall rating of A. Click here to see them.
ALGN has gained 34% over the past three months, surpassing average industry price gains. The stock is currently trading above its 50-day and 200-day moving averages of $557.05 and $429.38, respectively. ALGN should continue to rally in 2021, driven by rebounding industry, as well as financial strength.
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ALGN shares were unchanged in after-hours trading Tuesday. Year-to-date, ALGN has gained 14.94%, versus a 4.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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