ALGN - Embedded Expectations Analysis - 2020 03 18
ï€ Align Technology, Inc. (ALGN:USA) currently trades above historical averages relative to UAFRS-based (Uniform) Earnings, with a 37.8x Uniform P/E. Even at these levels, the market has bearish expectations for the firm, but management is confident about growth, Invisalign First, and margin improvementï€ Specifically, management is confident their business in China will continue to grow after COVID-19 is addressed, that they can sustain 20%-30% growth rates in their general business, and that MAS and Invisalign First, including palate expansion, have become 20%-25% of the teen marketplace. Moreover, they are also confident they can drive gross margin improvement in their comprehensive cases since promotional activities drive the mix effect between ortho and GP cases, and that they are starting to use non-GAAP figures to present investors with greater transparency about their core business operations
Align Technology is a medical device company engaged in the design, manufacture and marketing of Invisalign? clear aligners and iTero? intraoral scanners and services for orthodontics, restorative and aesthetic dentistry. The company's segments are: Clear Aligner, which includes the Invisalign System, a method for treating malocclusion based on a proprietary computer-simulated virtual treatment plan and a series of doctor-prescribed, custom manufactured, clear plastic, removable aligners; and Scanners and Services, which includes Intraoral scanning that enables the dental practitioner to create a 3D image of the patient's teeth (digital scan) using a handheld intraoral scanner.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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