What happened

Shares of Align Technology (ALGN 1.54%), the maker of Invisalign clear aligners, climbed 18.7% in July, according to data from S&P Global Intelligence. Align's shares closed at $236.67 on June 29, the last trading day of that month. It saw a high of $283.83 on July 27 and closed the month at $280.97 on July 29, the last trading day of the month. The stock has a 52-week low of $225.86 and a 52-week high of $737.45 and is down more than 55% so far this year.

So what

Align's shares rose immediately after the company released second-quarter earnings. The interesting thing is the numbers were down, both year over year and sequentially, but because investors were expecting even worse numbers, the stock rose. Another factor is that Align stock has been beaten up this year, but the company is still profitable and some may feel it is undersold.

In the second quarter, the company reported revenue of $969.6 million, down 0.4% sequentially and 0.8%, year-over-year. The company also reported earnings per share (EPS) of $1.44, compared with $2.13 last quarter and $3.04 in the same period a year ago. Another promising note, despite lower second-quarter numbers, the company is still ahead of where it was through six months last year, with revenue of $1.942 billion compared with $1.905 billion, though EPS is down to $3.13 through six months compared with $5.02 through the same period last year.

The biggest driver of the company's revenue was its Clear Aligner system, responsible for $798.4 million in revenue, down 1.4% sequentially and 5.1% year over year. 

The company cited several reasons for the lower numbers. The impact of a rising dollar on international sales; the ongoing impact of COVID-19 lockdowns, particularly in China; inflation; supply issues; and the impact of Russia's invasion of the Ukraine. Still, while the company's gross margin has gone from 75% a year ago to 70.9% in the second quarter, that's an enviable margin.

Now what

Investors will wait to see if the healthcare company's revenue and profits continue to decline. At this point, the stock's price, even with the increase in July, appears to be reasonable with a price-to-earnings ratio of 32.83, and if the market forces that have been holding it back ebb, the company can expect to see more growth. The company has first-mover advantages among clear aligner makers and still continues to have strong free cash flow, which allows it to invest in new products. It's also worth noting that it has managed to increase annual revenue every year for more than a decade and is on track to do the same again this year.