Align Technology Inc (NASDAQ: ALGN) reported its Q4 numbers in late January. And as has become a fairly regular occurrence, it surprised to the upside.
ALGN makes the Invisalign brand of orthodontic products. Fundamentally, it’s the next generation of braces. The clear “aligners” are designed and built using proprietary imaging equipment that ALGN also makes.
This new technology, including the patented polymer that makes up the aligners, is changing the face of orthodontics, literally as well as figuratively. These clear aligners are far less visible than traditional metal braces. And that means ALGN has a much bigger market to pull from than traditional braces.
There are adults who are seeing their teeth lose the alignment they had after having braces when they were younger. There are cost-conscious people who could never afford braces that can now buy into aligners.
What’s more, in recent years, ALGN has gone global. That is a huge untapped market and given Align’s reach at this point, it has used its growing base as a moat to any potential competition.
You see, the U.S. has been the country where straight white teeth have been a status symbol for many decades. Whether it was an invention of Madison Avenue or not, dentistry became sign of modern Western civilization.
Since those days, it has spread to Europe and now Asia. And ALGN is taking advantage of this opportunity by delivering a quality product at a reasonable price that is easy to use.
Aligners aren’t for everyone, but they are for enough people that ALGN sells its products not only to orthodontists — who still are required for difficult and complex issues — but to dentists as well. This is a great new business opportunity for dentists and another huge growth channel for ALGN.
Another big growth engine for ALGN is the SmileDirectClub (SDC). You may have seen ads playing on television.
This club was started in 2013, basically from crowdfunding site Indiegogo. Its goal was to get past having to see a professional at all and get people to take a cast of their teeth at home and include a photo of themselves. They would ship this back and receive aligners in the mail that they would use until the next shipment arrived. This cut the costs of typical orthodontic treatment significantly.
As it began to take off, ALGN took notice and bought a 20% stake in SDC in 2016. It also became the sole manufacturer for SDC aligners.
Since then, advertising has ramped up significantly, focusing on the Millennial and Gen X markets. And given ALGN’s Q4 numbers, all this is paying off.
ALGN stock is off almost 17% in the past week as the market has swooned and it’s been a pretty expensive stock for some time. But this selloff simply means you get a 17% discount on the price of a great long-term growth stock.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
