What happened

After reporting third-quarter financial results that beat industry watchers expectations, shares in Align Technology (NASDAQ:ALGN) are surging 14.1% higher at 11:30 a.m. EDT.

So what

Years of double-digit demand for Align Technology's Invisalign orthodontics have turned its shares into one of healthcare's best-performing stocks. Following its third-quarter performance, it appears there's still plenty of market share left for it to capture.

A businessman smiles with his arms raised as $100 bills fall from the sky around him.


In the third quarter, case shipments of the company's Invisalign clear aligners grew 32.8% year over year to 236,100. Growth was driven by a 46.3% increase in shipments to teenage patients and a 47.4% increase in international case shipments. Case shipments were lower in North America; however, they still grew 25% from last year. 

Increased shipments translated into 38.3% top-line growth to $385.3 million. Leveraging sales against fixed costs resulted in $82.6 million in net operating income from continuing operations, up 60.7% from Q3, 2016. After adjusting for the impact of currency and one-time items, adjusted EPS improved 60.3% year over year to $1.01 in the quarter.

The rate of shipment, sales, and adjusted earnings growth all accelerated from the second quarter, and the third-quarter figures topped management's expectations exiting June. Align Technology's guidance for the quarter had been for shipment growth of 30% to 32%, revenue growth of between 27% to 29%, sales of between $355 million and $360 million, and EPS of between $0.78 to $0.81. 


Q3 2017 

Q3 2016 

Year-Over-Year Change


 $385.3 million

 $278.6 million


     Clear aligners

$341.6 million

$243.7 million


     Scanner & services

$43.7 million

$34.9 million


Net profit

 $82.6 million

 $51.4 million


Diluted EPS




Now what

The strong quarter builds on a track record of sales and profit growth over the past decade, yet the market opportunity for clear aligners remains huge because traditional metal braces still account for about 95% of all patients treated.

ALGN Revenue (TTM) Chart

ALGN Revenue (TTM) data by YCharts.

As Align Technology's R&D investments pan out with an ability to treat increasingly complex dental conditions, Align Technology should continue chipping away market share. Growing global wealth also presents a significant opportunity for sales to increase overseas as more people seek treatment. Only about 10 million of the nearly 1 billion people with crooked teeth worldwide currently seek treatment.

In the fourth quarter, management believes Invisalign case shipments will grow between 29% to 32% from the same quarter because of these tailwinds. If so, then revenue will climb between 33% to 36%, and EPS will be between $0.92 to $0.95 in the quarter.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.