Market Capitalization $20.4 Billion

Transcription

1 BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate SDAQ: BUY BUY RATING SINCE 07/19/2013 TARGET PRICE $ BUSINESS DESCRIPTION Align Technology, Inc. designs, manufactures, and markets a system of clear aligner therapy, intra-oral scanners, and computer-aided design and computer-aided manufacturing (CAD/CAM) digital services. Sector: Health Care Sub-Industry: Health Care Supplies Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years TARGET PRICE $ STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues Net Income EPS Rating History BUY RETURN ON EQUITY (%) Ind Avg S&P 500 Q Q Q P/E COMPARISON Volume in Millions COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History RECOMMENDATION We rate () a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value EPS ALYSIS¹ ($) Ind Avg S&P 500 HIGHLIGHTS The revenue growth greatly exceeded the industry average of 1.7%. Since the same quarter one year prior, revenues rose by 38.3%. Growth in the company's revenue appears to have helped boost the earnings per share. has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, has a quick ratio of 2.17, which demonstrates the ability of the company to cover short-term liquidity needs. Q Q Q Q Q Q Q = not available NM = not meaningful Q Q Q Q Compustat fiscal year convention is used for all fundamental data items. The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Health Care Equipment & Supplies industry and the overall market, 's return on equity significantly exceeds that of the industry average and is above that of the S&P 500. reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, increased its bottom line by earning $2.34 versus $1.77 in the prior year. This year, the market expects an improvement in earnings ($3.65 versus $2.34). The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Health Care Equipment & Supplies industry average. The net income increased by 60.7% when compared to the same quarter one year prior, rising from $51.37 million to $82.56 million. PAGE 1

2 SDAQ: PEER GROUP ALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) ICUI -20% 180% UNFAVORABLE MMSI NEOG QDEL HYH WST 14% EBITDA Margin (TTM) XRAY HAE FAVORABLE COO ATRI 34% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $1.2 Billion and. Companies with or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -20% 180% UNFAVORABLE -6% XRAY Earnings Yield (TTM) QDEL ICUI FAVORABLE MMSI NEOG WST COO HAE HYH ATRI Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -1.5% and 172.2%. Companies with or NM values do not appear. 3% INDUSTRY ALYSIS The Health Care Equipment & Supplies industry has two main lines of business. One sub-industry supplies health care equipment to hospitals and patients in outpatient care. The other sub-industry focuses on the creation of new and more technologically advanced medical equipment to improve the efficiency and accuracy of patient care. The industry remained relatively throughout the past bear markets and slowly improving economy. As the improvements in the economic backdrop propelled exciting growth in many industries, the Health Care Equipment & Supplies industry s performance has been comparatively lackluster. However, the industry environment has remained largely positive. There are a couple of main growth factors that have driven this industry to perform well. The first and most influential demographic factor for this industry is the increasing age of the population. The total elderly population has grown significantly, while baby boomers have shifted into their 60s and 70s. Not only is the average life span increasing, but people are also remaining much more active later in life than in the past. This has expanded demand for many products supplied by this industry ranging from medical devices for serious conditions that, more often than not, affect the older population (such as pacemakers and stents) to devices and surgeries that help improve the quality of life (such as joint replacements and laser eye surgery). Another factor is the growing demand by patients and doctors alike for improved technology and better health care equipment. This has caused health care equipment suppliers to increase their research and development expenditures to try to discover more efficient and effective products. One concern for this industry is the potential for federal budget cutbacks that would negatively affect those companies receiving some form of federal funding. ObamaCare, also known as the Affordable Care Act, adding more patients covered by health insurance could increase the customer base for this industry. The future of the industry has a positive outlook, due to the continually aging population. The key factors mentioned above not only indicate the increase in the industry s clientele, but also show that the Health Care Equipment & Supplies industry is actively working towards helping health care facilities improve their ability to treat this clientele more accurately and efficiently. PEER GROUP: Health Care Equipment & Supplies Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) , , WST WEST PHARMACEUTICAL SVSC IN , , ICUI ICU MEDICAL INC , , NEOG NEOGEN CORP , HAE HAEMONETICS CORP , HYH HALYARD HEALTH INC , , MMSI MERIT MEDICAL SYSTEMS INC , XRAY DENTSPLY SIRO INC ,430 NM 3, QDEL QUIDEL CORP ,292 NM ATRI ATRION CORP , COO COOPER COMPANIES INC , , The peer group comparison is based on Major Health Care Supplies companies of comparable size. PAGE 2

3 SDAQ: Annual Dividend Rate COMPANY DESCRIPTION Align Technology, Inc. designs, manufactures, and markets a system of clear aligner therapy, intra-oral scanners, and computer-aided design and computer-aided manufacturing (CAD/CAM) digital services. The company's Clear Aligner segment offers Invisalign Full, a treatment used for a range of malocclusion; Invisalign Teen treatment that addresses orthodontic needs of teenage patients, such as compliance indicators, compensation for tooth eruption, and six free single arch replacement aligners; and Invisalign Assist treatment for anterior alignment and aesthetically-oriented cases. It also provides Invisalign Express (10 and 5) and Invisalign Lite/i7 treatments for orthodontic cases, non-comprehensive treatment relapse cases, or straightening prior to restorative or cosmetic treatments; Invisalign Go, a solution for general practitioner dentists (GPs) to identify and treat patients with mild malocclusion; SmileDirectClub aligners for minor tooth movement; custom clear aligner retainers used to maintain tooth position and correct minor relapse; and SmartTrack, a custom-engineered material that delivers force for orthodontic tooth movements. The company's Scanners and Services segment offers itero Scanner, a single hardware platform with software options for restorative or orthodontic procedures; and Restorative software for itero, a software for GPs, prosthodontists, periodontists, and oral surgeons. It also provides Orthodontic software for itero, a software for orthodontists for digital records storage, orthodontic diagnosis, Invisalign digital impression submission, and for the fabrication of printed models and retainers; CAD/CAM services, such as itero Models and Dies, OrthoCAD icast, and OrthoCAD irecord; and Invisalign outcome simulator, a chair-side and cloud-based application for the itero scanner, as well as third party scanners and digital scans for Invisalign treatment submission. The company was founded in 1997 and is headquartered in San Jose, California Orchard Parkway San Jose, CA USA Phone: Fax: STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 5.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 90% of the stocks we rate. Total Return 5.0 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 90% of the companies we cover. Efficiency 5.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 90% of the companies we review. Price volatility 5.0 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 90% of the stocks we monitor. Solvency 4.5 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 80% of the companies we analyze. Income 0.5 out of 5 stars Measures dividend yield and payouts to shareholders. This company pays no dividends. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3

4 SDAQ: Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 0.94 Q4 FY E 2017(E) 4.45 E 2018(E) INCOME STATEMENT Net Sales ($mil) EBITDA ($mil) EBIT ($mil) Net Income ($mil) FINCIAL ALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. The company has grown sales and net income significantly, outpacing the average growth rates of competitors within its industry. is extremely liquid. Currently, the Quick Ratio is 2.17 which clearly shows the ability to cover any short-term cash needs. The company's liquidity has decreased from the same period last year. During the same period, stockholders' equity ("net worth") has increased by 21.56% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is very unlikely to face financial difficulties in the near future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit BALANCE SHEET Cash & Equiv. ($mil) Total Assets ($mil) 1, , Total Debt ($mil) Equity ($mil) 1, PROFITABILITY Gross Profit Margin 78.51% 77.57% EBITDA Margin 28.22% 24.76% Operating Margin 25.63% 22.28% Sales Turnover Return on Assets 15.83% 14.05% Return on Equity 22.73% 19.63% DEBT Current Ratio Debt/Capital Interest Expense Interest Coverage SHARE DATA Shares outstanding (mil) Div / share EPS Book value / share Institutional Own % Avg Daily Volume 986,671 1,234,297 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4

5 SDAQ: RATINGS HISTORY Our rating for has not changed since 7/19/2013. As of 11/16/2017, the stock was trading at a price of which is 1.1% below its 52-week high of $ and 187.9% above its 52-week low of $ Year Chart BUY: $ $300 $200 $100 MOST RECENT RATINGS CHANGES Date Price Action From To 11/16/15 $65.15 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 11/16/2017) 43.95% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months % Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss % Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY Research Contact: Sales Contact: VALUATION BUY. 's P/E ratio indicates a significant premium compared to an average of for the Health Care Equipment & Supplies industry and a significant premium compared to the S&P 500 average of For additional comparison, its price-to-book ratio of indicates a significant premium versus the S&P 500 average of 3.16 and a significant premium versus the industry average of The price-to-sales ratio is well above both the S&P 500 average and the industry average, indicating a premium. Upon assessment of these and other key valuation criteria, proves to trade at a premium to investment alternatives within the industry. Price/Earnings Peers Premium. A higher P/E ratio than its peers can signify a more expensive stock or higher growth expectations. Price/Projected Earnings Peers Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations. Price/Book Peers 5.24 Premium. A higher price-to-book ratio makes a stock less attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. Price/Sales Peers 5.73 Premium. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. industry. DISCLAIMER: Price/CashFlow Peers Average. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a valuation on par to its Price to Earnings/Growth 1.36 Peers 0.63 Premium. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant premium to its Earnings Growth lower higher Peers Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher Peers Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share. has a sales growth rate that significantly exceeds its The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at PAGE 5