With a global market size forecast by Allied Market Research to reach $2.6 billion by 2023, orthodontics and teeth alignment services are gaining significant customer demand. As a result, dentistry and teledentistry companies are competing heavily to deliver the best products for consumers, with the lowest price and highest satisfaction. 

Furthermore, a growing market has led to lucrative investment opportunities in the dentistry/orthodontics sector. Today, let's take a look at two companies that are at the forefront of innovation in manufacturing clear teeth aligners to determine which has the better products -- and which is the better buy. 

Woman with invisible dental braces.

Image Source: Getty Images.

A new player in teledentistry

In April, SmileDirectClub (SDC -3.45%) received a patent for its innovative business model. After a single visit to a SmileShop for a dental scan, patients receive their 3-D printed teeth aligners in the mail and complete their treatment without requiring follow-up visits with an orthodontist. The entire process is digital and demands little upkeep. Thanks to this new patent, SmileDirectClub will be able to avoid having competitors following in its precise footsteps for up to 18 years.

So far, more than 1 million customers have been treated with SmileDirectClub's aligners. Out of 81,549 Google Reviews, 97% have been positive. SmileDirectClub's sales have taken off in the past couple of years: In the first quarter of 2018, it sold just 42,847 aligners. Two years later, that number had tripled to 122,751. Over the same period, revenue grew from $68.4 million to $196.7 million. 

Recently, however, the company's sales have slumped due to the COVID-19 pandemic. Its customers must have a consultation at a retail SmileShop before they can begin treatment, and with locations closed as part of lockdowns and providers and patients deferring dental and orthodontic procedures as part of the effort to slow the spread of the virus, demand for SmileDirectClub's products has plummeted. Now that its SmileShops have reopened, however, the company has begun offering a plan for people using competing products that would allow them to switch to SmileDirectClub for just $895 total up front. That's a dramatic discount from the average selling price of $1,770 per aligner in Q1.

All that said, business troubles due to COVID-19 are by no means a problem exclusive to SmileDirectClub.

A cutting-edge dentistry competitor

Align Technology (ALGN 0.38%) sold its first clear aligner to U.S. orthodontists in 1999. In the first quarter of 2020, it sold more than 359,400 units of Invisalign. The treatment is surprisingly affordable, with an average cost of $5,000, or just $500 to $1,500 with insurance co-pays. Currently, the devices are being offered in more than 45 countries and treating 2.5 million patients with a 96% satisfaction rate as reported by multiple dental clinics.

That's not all: Celebrities such as Oprah Winfrey, Tom Cruise, and Justin Bieber have all used Invisalign. Hence, it should be no surprise that Align Technology's top and bottom lines have grown significantly. In the past few years, the company's revenue has increased by 25% steadily each year, and it boasts an impressive 72% gross margin and 22% operating margin.

Unfortunately, in the world of COVID-19, the company's products are considered nonessential. When the pandemic struck, healthcare providers and patients alike began deferring orthodontic procedures, both to prioritize resources and protective gear for those combating the coronavirus, and due to a justifiable fear of exposure to it via the unavoidable physical contact inherent in dental work.

Today, in states such as Texas that have broadly reopened their economies but are experiencing exponential growth in the number of new COVID-19 cases, authorities and healthcare systems are halting elective procedures once again until the their statewide outbreaks are under control, and those restrictions may extend to dental offices as well.

The pandemic's effects on Align Technology's business model are severe. In Q1, the company brought in $551 million in revenue -- flat year over year. Keep in mind that this result only partially reflects the impact of COVID-19, as the pandemic only began accelerating in the U.S. in mid-March. It is likely investors will have to endure several quarters of sales and profit declines before Align Technology's business begins to rebound.

Which company is better?

Both Align Technology and SmileDirectClub's clear aligners are 3-D printed and have similar efficacy, costs, and satisfaction rates. However, because SmileDirectClub's business is almost entirely online, it does suffer from not having dental professionals physically available to customers in case something goes wrong. Align Technology's patients, by contrast, are connected to an orthodontist for the length of their treatment.

Both companies also have huge cash piles and little debt. In terms of valuation, SmileDirectClub is trading at a price-to-sales ratio of 4 compared with Align Technology's pricey 9. Therefore, I would argue that while Align Technology has the slightly better product ecosystem, SmileDirectClub is the better value for investors. I expect shares of both companies to rebound sharply once the COVID-19 pandemic subsides and demand for teeth aligners returns.