My wife Tracy just got the kind of news from her dentist that no one really wants to hear.
Turns out she has a crack in one of her teeth and needs to have a crown installed.
On the other hand, she did find out something very interesting. Her dentist is qualified to install Invisalign braces.
As the term implies, these are not the metal wireworks that can make people feel embarrassed when they smile.
Instead, they are clear mouth guards you wear most of the day. It’s a great solution for adults like Tracy.
She had braces as a kid, but over the years stopped wearing her retainer. The result is that some of her lower teeth have drifted and she’d like to have that corrected.
There’s a lot more going on here than simple pride. It’s part of a market that is doubling every nine years, and will soon be worth $2.6 billion.
A Beaming Trend
Now then, it isn’t just adults like Tracy who are opting for this nearly invisible way to correct crooked teeth.
Teens around the U.S. are jumping on board as a great way to avoid the embarrassment that can come with wearing braces.
I can only wish my daughters had the option a few years back when they needed orthodontics. Indeed, I still have a photo of my older daughter, Jordan, with a big, beaming smile they day she got her braces off.
If I had any doubts about the future of Invisalign technology, that photo erased them. There’s nothing quite like having a great smile to boost a person’s self-esteem.
Make no mistake. There’s some great tech at play here as well.
A Growing Target
Let’s start with the custom molds behind the “aligners” that patients wear.
An orthodontist or dentist uses 3D imaging of a patients teeth. Technically, the device is known as an iTero Element Scanner, a cutting-edge systems that renders a highly accurate molds of a patient’s gums and teeth.
In turn, these aligners are made with what’s known as “SmartTrack” material produced with 3D-printing tech. The clear compound applies gentle, constant force that results in treatment times that beat standard metal braces by as much as 50%.
The system has been catching on like wildfire. Backed by more than 450 patents, the Invisalign system has so far transformed the smiles of 6 million people in the U.S.
Of that number, 1.6 million are teens. And that’s important because with a target of 10 million young people, Align Technology Inc. (ALGN) has a target rich opportunity.
It only counts about half of its target market as patients fit for its platform. But since it has so far hit less than 20% of its audience, the firm is on a great growth curve.
A recent report by Allied Market Research backs that up. The report says global orthodontic sales are growing at 8.2% a year. By 2023, the market will be worth roughly $2.6 billion
Align is cashing in on this trend. Last year alone, it shipped roughly 1.2 million Invisalign systems. That was a 32% increase from the year before. Sales of the Clear Aligners themselves came in at $1.7 billion, which is a yearly gain of 29.2%.
And our timing is good. The company crushed it with second quarter earnings with a per-share increase of 40% from the year-ago quarter. However, Wall Street hit the panic button, sending shares more than 28% in two sessions. That’s because Align said it may have slower growth than earlier thought in China for the current quarter while the world’s most populous nation remains in a trade dispute with the U.S.
But we don’t worry about a single quarter’s results. Indeed, we can turn this to our advantage by picking up shares of this long-time market crusher at a deep discount.
Of course, global sales are helping. While Align was mostly focused on the U.S. in its early days, it is now ramping up overseas operations, where shipments last year were up 45%.
In other words, this is a company leaving no stone unturned in the drive for higher sales and profits. Which explains how my wife got her recent Invisalign estimate.
See, she didn’t go to a specialized orthodontist. Instead, she went to her regular dentist and discovered she is also trained in the Invisalign system.
This is another part of the firm’s growth plans. Last year, sales to general practitioners rose 17.3% in the U.S. and 45% overseas.
Now you know why I think the company made the right move back in June 2015 when it hired Joseph M. Hogan. He’s an expert in healthcare, high tech and industrial automation.
He spent the previous five years as CEO of ABB Ltd. (ABB), $40 billion global power and automation technologies firm. During his time there, Hogan oversaw a 25% increase in revenues, a pretty impressive feat for a company so large.
Before that, he spent 25 years at General Electric Co. (GE), where he served as CEO of GE Healthcare for eight years. During his tenure, he found new markets, launched new products and saw sales more than double from $7 billion to $16 billion.
Besides being a health tech expert, Hogan is apparently a whiz at marketing as well. Align is making savvy use of social media with its Invisalign Smile Crew, a group of young people flaunting their high-tech smiles.
Don’t scoff. At the end of last year, the company had more than five million social media fans. Not only that, but it has had some 49.4 million visitors to its website.
At the same time, Align is taking a page from Apple Inc.’s (APPL) playbook by opening retail stores to showcase its technology. Last year, more than 55,000 people visited one of the 12 stores and 10,000 of them received complimentary dental scans.
The Upside Ahead
Add it all up and you can see that this is a stock with a lot of upside. And we are able to get in at a discount from the stock’s long-term trend line.
Align sold off last fall with the rest of the market. But as a quintessential growth stock it over corrected, falling some 50% in the fourth quarter.
But then Wall Street woke up to the great story here. From the time the market hit bottom last Dec. 24, the stock is up 48%.
That compares with a 27% increase for the S&P 500. That means Align beat the broad market by 74.5%.
But don’t worry, I still see plenty of upside. Over the past three years, it has grown its per-share profits by 44%. That means they are doubling on average every 18 months.
If we cut that in half to 22% to be conservative, that would still give us a double in just a little over three years.
This is one of those kinds of plays that will have you smiling all the way to the bank as you really ramp up the value of your net worth.
Speaking of padding your net worth…
My colleague, Money Morning’s Chief Investment Strategist, Keith Fitz-Gerald, has uncovered a mysterious Great Depression-era secret to help everyday Americans achieve the retirement of their dreams.
Turns out, what Keith call’s “the 26(f) program“ could make you $68,870 or more.
That’s the kind of money that could help you upgrade your kitchen or make a down payment on a beach condo at your family’s favorite vacation spot.
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Cheers and good investing,
Michael A. Robinson
P.S.: I’ll be speaking at The Money Show – San Francisco this Aug. 16th from 10:45 a.m. to 11:30 a.m. Pacific time. If you’re in the area, I suggest you stop by. I’ll be talking about How to Own Great Tech Stocks For Free. So don’t miss it! You can register by clicking here.