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.

Todd Campbell owns shares of Align Technology.His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Align Technology. The Motley Fool has a disclosure policy.