Finding a great new company for my Stocks and Shares ISA isn’t easy. After all, I’m incredibly selective. I always look for two crucial elements. The first is excellent value for money. The second is good growth forecasted for the future. Thankfully, Align Technologies (NASDAQ:ALGN) looks like it might have both.
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Investing in Invisalign
The firm controls over 90% of the market for misaligned teeth, with its dominant product called Invisalign. There are over 230,000 dentists and orthodontists who are trained to use the product.
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Almost half of the company’s revenue comes from the US, but it also generates income from all over the world.
Did you know Align Technologies was one of the very first dental services companies to harness 3D printing? Each Invisalign aligner is custom-made for the patient using this technology.
The valuation has become much better
In 2021, the shares reached over $700 each. Now, they’re just over $300. At the peak of the extortionate value, the price-to-earnings ratio was over 100. Today, it’s just 54. So, you can see why I’m more drawn to invest in the company now than previously.
The business went through a very high-growth period around 2021 in earnings. I think the market got a bit ahead of itself here. When the profits contracted, the share price shot down disproportionately, just like it did when it first rose. That’s because investors’ expectations were way too inflated.
However, now, I think the shares have found some solid ground again. Considering the growth that analysts expect for Align over the next three years, I think the current price-to-earnings isn’t unbearable.
Growth looks set to resume from here
Have a look at the following table, which shows how analysts expect Align’s earnings to grow and how it has performed in the past:
| Over 10 years | Over five years | Over one year | Next three years | |
| Annual earnings growth | 23.8% | 4.8% | 83.3% | 11.5% |
While it has had some difficulty over the past five years, the last year has been exceptionally promising. And I think the forecasted 11.5% is a sturdy step in the right direction for continued long-term growth after the troubling price decline.
Technology and valuation risks
The company has mentioned in its most recent 10-K filing with the US Securities and Exchange Commission that it could face competition risks.
For example, there are new scanners and software, most prominently CAD/CAM, that could disrupt Align’s moat in the area. As we are in a period of deep technological change, new competitors could develop new systems that take market share from Align.
Also, I mentioned the valuation is more stable now, but I do think there is some chance that it could become a problem again. Therefore, if I do invest, I’ll want to get in sooner rather than later. I’ll also monitor for any speculation happening in the market for the stock so I can sell accordingly.
One of the investments I like most
Even given the risks, I think Align is an excellent company and should do very well in the next few years.
While I’m not investing at the moment, over the next few months, I might consider it.
