Few people in the world aspire to be a dentist. However, we can’t do without them. Dentistry is one of the most underrated sectors in the market, but it is also one of the most stable ones. It doesn’t matter if there is a recession or inflation is creeping up people will continue to spend on oral hygiene. A stock that is part of this recession-resistant sector is Align Technology (NASDAQ: ALGN).
Align Technology is a company that manufactures 3D scanners and the Invisalign clear aligners used in orthodontics.
The company has a market capitalization of $20.23 billion, which underscores the size and scale of its business. Its aligners are expensive and can cost over $2,000, but its customers can make payments over several years, which should help its business even during inflation.
Align stock slumps in 2022
Align stock has suffered in 2022, and has underperformed the broader markets by a huge margin. It has fallen over 60% so far, but that is what makes it a perfect buying opportunity. The company’s numbers for Q1 weren’t great. It missed EPS estimates by $0.09, leading to a crash in its stock price.
Total revenues for the period came in at $973.2 million, compared to $894.8 million in the year-ago period. The company said that the continued impact of COVID-19, especially in China, rising inflation, and the Russia-Ukraine conflict, culminated in supply chain pressures that impacted its numbers..
The fact that around half of Align’s business occurs outside the U.S. didn’t help as unfavorable foreign exchange rates negatively impacted its revenues, margins, and EPS.
Strong guidance may drive ALGN stock higher
Align is still optimistic that it will hit its long-term revenue growth target of 20-30%. The company has a less than 10% share in the market where it operates, allowing it enough room to grow it's top-line going forward. Globally, there are over 500 million people who can avail of its products, and the company is in a prime position to execute these needs.
A Grand View Research report says, “The global clear aligners market size was valued at USD 4.7 billion in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 29.5% from 2022 to 2030.”
In an investor letter earlier this year, Polen Capital Growth Fund explained that Align Technology continues to de-risk while focusing on growth. The report emphasized Align manufactures over 800,000 unique clear aligners each day, making it difficult for competitors to match its scale.
Polen Growth Capital stated, “We applaud management’s stewardship of the business thus far and believe there is a very long period of compounding ahead of it. Despite robust fundamentals, the company was swept up in the sell-off that occurred during the quarter, and we took advantage of the favorable valuation by raising it to an average position size within the portfolio.”
Align Technology announced it would repurchase up to $200 million of its stock in an accelerated stock repurchase program.
The company’s revenues have grown from $1.97 billion in 2018 to $3.95 billion in 2021, at a CAGR of 26.1%. Align Technology closed July 12 at $248. The consensus on the target price is $474.33, which is a potential upside of over 90%.
As long as people want to ensure they have straight and healthy teeth, Align Technology will continue to grow. It’s one of the best examples of a buy forever stock.