Align Technology's Invisalign Sales Strong Amid Margin Woes

On Aug 21, we issued an updated research report on Align Technology (NASDAQ:ALGN) , which manufactures and markets a system of clear aligner therapy, intra-oral scanners and CAD/CAM (computer-aided design and manufacturing) digital services used in dentistry, orthodontics and dental records storage. The stock currently has a Zacks Rank #3 (Hold).

Align Technology has been trading above the industry since last month. The stock has gained 4.2% in this period as compared to 7.3% decline of the industry. The company’s strong InvisAlign Technology prospects and growth in North America and international regions look encouraging.

In EMEA, second-quarter 2017 volumes surged 33.2% year over year, reflecting a continued adoption of InvisAlign Technology in core markets like the U.K. and Spain as well as rapid growth from expansion in new markets including Eastern Europe, Central Europe and Benelux. During the reported quarter, volumes soared 44.4% year over year in the Asia Pacific belt, led by China and followed by SouthEast Asia, Japan and ANZ (Australia and New Zealand).

Great news is that the company has recently opened a new InvisAlign Technology Treatment Planning facility in China. Plus, a multimillion dollar marketing campaign for InvisAlign Technology brand promotion is also likely to keep investors upbeat. The company’s receipt of two U.S. patents for SmartTrack Aligner material no doubt buoys optimism.

On the contrary, foreign exchange headwinds continue to pose a major dampener to the company’s international performance. Also escalating costs and expenses are weighing on its margins. Last month, a comparative study of Align Technology’s forward P/E (forward 12-month basis) multiple reflected that the stock has been quite overvalued.

Key Picks

Some better-ranked medical stocks are Edwards Lifesciences Corp. (NYSE:EW) , Lantheus Holdings, Inc. (NASDAQ:LNTH) and Stryker Corporation (NYSE:SYK) . Edwards Lifesciences sports a Zacks Rank #1 (Strong Buy), while Lantheus Holdings and Stryker carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has climbed around 19.4% over the last six months.

Lantheus Holdings has a long-term expected earnings growth rate of 12.5%. The stock has surged 28.6% over the last six months.

Stryker Corporation has a long-term expected earnings growth rate of 10.00%. The stock has rallied roughly 12.8% over the last six months.

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