Investors in Align Technology (NASDAQ:ALGN) have had plenty to be optimistic about. The orthodontics-maker has proven time and again its ability to continue to find new markets for its Invisalign transparent teeth-straighteners, and that growth has recently been accelerating. The company was among of the best performers of 2017, and it has returned a massive 60% so far this year.

With that type of outperformance, investors will be looking for any cracks in the veneer when Align reports financial results for the 2018 second quarter on July 25, after the close of the market. Let's review a few metrics that will be scrutinized by investors going into the company's earnings report.

A woman smiling as an orthodontist shows images on a computer screen of before and after images of straightened teeth.

Image source: Align Technologies.

Can its hectic growth continue?

Over the past several years, Align has achieved torrid growth, and the biggest question has always been whether or not the company could continue to add new customers at that pace. During the first quarter, revenue grew 41% year over year to a record $437 million, while diluted earnings per share of $1.17 increased 38%. This growth was fueled by case shipments that jumped 31% compared to the prior-year quarter, and propelled higher by its scanner and services revenue, which soared 84% over the year-ago quarter. 

For the second quarter, Align forecast revenue in a range of $460 million to $470 million, which would represent 30.5% year-over-year growth at the midpoint. While this forecast is below recent results, the company is typically conservative in its guidance. Align also expects Invisalign case shipments to increase to between 296,000 and 301,000, growth of 29% compared to the prior-year quarter. This is all expected to positively impact the bottom line as Align expects diluted earnings per share in a range of $1.02 and $1.06, up 22.4% at the midpoint, compared to the same quarter last year.

For their part, analysts are also expecting bullish growth. Analysts' consensus estimates are calling for revenue of $471.88 million, which would represent 32.4% growth year over year, and diluted earnings per share of $1.09, an increase of 28.2% over the prior-year quarter. 

Other things to watch

One of the factors that has been instrumental in Align's progress has been the company's ability to innovate and improve its product portfolio. So far in 2018, the company has expanded its line of Invisalign products, increased the capabilities of its iTero scanners, and received regulatory approvals in a growing number of international markets. Those innovations can be traced to the company's growing research and development budget, which grew 30% year over year in the first quarter. Watch for these investments to continue. 

Another item of interest will be the ongoing legal dispute with SmileDirectClub (SDC), an at-home orthodontic supplier. Earlier this year, SDC filed suit against Align saying that the company's pilot store project, which was designed to connect potential customers with authorized Invisalign providers, violated a non-compete agreement between the two. SDC requested an injunction to halt the project and prevent Align from opening any additional stores. Late last month, a judge denied SDC's request for a temporary injunction, and the dispute is scheduled to be decided in arbitration in December. 

A word on valuation

Align Technologies has proved to be extremely profitable for investors, but that success has also led to a stretched valuation. Align currently trades at a whopping 115 times trailing earnings, and only a slightly more palatable 76 times forward estimates. The company's consistent growth will eventually hit a glitch, and when it does, investors with a less than long-term outlook will go running for the sidelines -- causing a commensurate drop in the stock price.

Looking out further on the time horizon, though, I expect Align will continue to execute, and patient investors will reap the benefits.