Align Technology stock (NASDAQ:ALGN) has been one of the best performing in the last couple of years. The share price was at $140 in March 2020 and has since then rocketed to an all-time high this week of $730, with a gain of 420% in this period. Align’s market capitalization now sits at $57 billion. In stark contrast, their biggest competitor, SmileDirectClub, has experienced a negative return of -25% on their stock in the same period.
Align Technology is best known for designing and manufacturing “Invisalign”, an innovative teeth straightening system that is replacing the traditional orthodontic solutions and is rapidly changing the dentistry industry. With the help of computer-aided design (CAD), the company manufactures sets of clear plastic mouthpieces which over time reposition and straighten teeth in a more convenient and less visible way than fixed metallic braces. The company is also expanding by cross-selling their software for wider dentistry use.
Align has had explosive earnings throughout the last two years. Q2 2021 revenues reached $1B, up a staggering 187% from Q2 2020, despite the pandemic. Another impressive feature of this stock is the combination of growth whilst still being profitable. Many high-flying US stocks these days have high revenue growth but disappointing margins and net profits, due to aggressive expansion plans and high costs. Align breaks the mould in that their margins have remained at an impressive 75% in recent quarters.
Align announced earlier this year that the company is starting a share repurchase programme worth $1 billion over the next 3 years. Buybacks are often viewed positively by investors, as the company uses corporate cash to repurchase a portion of their outstanding shares in the open market. This generally boosts the stock price and results in positive returns for the shareholders. It is also seen as a sign that company management believe that their shares are under-valued at current levels and are a good investment for the long-term.
Wall Street Favourite
Wall Street analysts have continued their bullish outlook on the company and have raised their target prices. As per Bloomberg surveys, 80% of analysts have a “Buy” rating on the stock, and Goldman Sachs is forecasting the price to exceed $800.
There is also a very positive belief within the institutional Buyside of the market, with key players such as Vanguard and Blackrock alone owning a combined 15% of the company’s shares.
Overall, we believe Align Technology is in a strong position to continue outperforming the market. The company has an innovative product with further growth potential and financial upside for shareholders.