Align Technology Inc (NASDAQ:ALGN) is up an order of magnitude more than the S&P 500 in the past two years. That means it’s up 237% compared to the S&P 500’s 28%.
That’s pretty good for a company that makes next-generation orthodontic equipment and devices.
Its ability to grow its Invisalign and iTero businesses while it still has patent protection is precisely what has driven ALGN to such heights. Its proprietary invisible aligners, as well as the iTero imaging products that help fit them for patients, are under patent protection for now.
ALGN proved its process and its ability to make a breakthrough in a market that hasn’t seen much breakthrough in generations. The braces of the 1960s are fundamentally the braces that most people get today.
Invisalign has changed that. Starting from a cosmetic platform, where older patients that needed some minor straightening done to a primary platform for children and adults with minor to moderate orthodontic needs to get their teeth straightened, ALGN has transformed itself into a juggernaut.
Like pharmaceutical companies with a blockbuster drug, the danger is always the patent cliff — what happens when the patent expires and competitors can jump into the game.
In October 2017, 40 of its 400 patents expired, which has allowed some other, smaller brands to attempt to expand their inroads and adjust their formulations for aligners.
Starting in 2018, an average of 23 patents a year will begin to expire.
This may sound like the end is nigh, but you wouldn’t be able to notice if you looked at ALGN earnings, which were just released last week.
Q1 revenue was up 40%, operating income was up almost 60%. Total shipments were up 30% and teen orders were up 40%. And most impressive of all was its iTero imaging business was up a whopping 84%.
Remember, these numbers aren’t impressive because the same quarter last year was bad. They’re impressive because this kind of growth has been going on for a while now.
It also shows that even with increasing competition, ALGN has built a huge lead that the others can only hope to grab a small piece of. In November 2017, ALGN marked its 5 millionth Invisalign patient. None of the competition can come close to that.
What’s more ALGN started with a direct-to-consumer model that quietly forced dentists and orthodontists to begin to carry Invisalign and iTero products. Now, its direct to consumer market is growing. And since other aligner companies don’t have the equipment side of the business, ALGN’s iTero line is growing because it can be used regardless of what brand aligner the dentist or orthodontist chooses.
To cap it all off, ALGN has operations beyond U.S. shores, specifically in China.
This may not seem like a very exciting space, but ALGN stock is certainly making it that way. And it’s likely to continue this trend for some time to come.
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.
