Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Teeth-straightening specialist Align Technology (Nasdaq: ALGN) soared 30% on Friday after its third-quarter results and outlook topped analyst expectations.
So what: Align's top and bottom line are trending so much stronger than expected -- adjusted EPS of $0.27 topped Wall Street by $0.08 on 31% sales growth -- that analysts are quickly scrambling to raise their valuation estimates. In fact, management even authorized a stock buyback program of up to $150 million, or about 11% of its market cap, giving investors even more reason to believe that the shares are undervalued.
Now what: For the fourth quarter, management now sees adjusted EPS of $0.20-$0.22 on sales of $124-$128.5 million, while analysts were expecting $0.18 a share on revenue of $122.6 million. Of course, while demand for its invisible braces is once again heating up, so is the competition from the likes of Dentsply (Nasdaq: XRAY) and 3M (NYSE: MMM). Although Align is still the bracket-free leader, today's 30% rally coupled with a now 30-plus P/E suggests that Mr. Market isn't considering enough of the downside.
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