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Anatomy of Success: Align Technology (ALGN)

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Discovering which stocks are best positioned to see their price increase is surely a daunting task, but by utilizing a tool like the Zacks Rank, it becomes much easier, and much more profitable.

Stocks with a #1 (Strong Buy) ranking have a long history of outperforming the markets over a one-to-three-month time period, and it’s important to note that only 5% of the Zacks Rank universe receives this unique grade. Not only does this ranking system help identify the most elite companies, but it also enables people to hold a certain security while it continues to gain in value beyond the three-month investment horizon.

Below is an example that demonstrates how an investor could have used the Zacks Rank to find a stock that is just beginning to see accelerated price appreciation.

Align Technology (ALGN - Free Report)

Align Technology is a global medical device company with industry-leading products such as Invisalign clear aligners, iTero Intraoral scanners, and OrthoCAD digital services that help dental professionals achieve the clinical results they expect and deliver effective, cutting-edge dental options to their patients.

ALGN was first added to the Zacks Rank #1 (Strong Buy) list after it reported record third quarter fiscal 2017 results. Earnings of $1.01 easily beat the Zacks Consensus of 82 cents per share, while revenues of $385 million surged 38.3% year-over-year. Total Invisalign case shipments were up 32.8% from the prior-year to 236.1 thousand, while the number of Invisalign case shipments to teenage patients grew 46.3%. Additionally, scanner and services revenues increased 25% year-over-year. At the closing bell on November 3, shares of Align Technology closed at $241.35.

The company maintained its Strong Buy run until the end of the year, and the next two times ALGN was added to the #1 list was likely due to bullish analyst sentiment for its upcoming second quarter fiscal 2018 report, one in the beginning of June and the next in mid-July.

In its Q2 report, Align reported solid beats on both the top and bottom lines, notching EPS and revenues of $1.30 per share and $490 million, respectively. The company’s Invisalign segment had another great quarter, and ALGN saw operating income growth of nearly 47%. Align also saw momentum from its iTero scanner and services business, which includes the continued rollout of the first iTero scanner shipments to China.

About seven months after first hitting the top of the Zacks Rank, ALGN closed up 38% to $333.09 per share, and eight months after its first Strong Buy listing, shares have increased 50% to $363.45. Right now, the stock is a #2 (Buy) on the Zacks Rank and has rallied more than 100% over the past one-year period.

This table shows the price performance of ALGN (in red), as well as the 12-month forward looking EPS estimate (in green) from the time the stock first earned a Zacks Rank #1 (Strong Buy). During this stretch, ALGN never moved lower than a Zacks Rank #3 (Hold).

By utilizing the Zacks Rank, investors are able to easily identify elite stocks that are best positioned to beat the market on a consistent basis, and how to hold those top stocks as they continue to grow.

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