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by H.S. Ayoub, DMD
BioHealth Investor.com


On Thursday, Align Technology (ALGN), the developer of the Invisalign clear teeth straightening system, blew past analyst estimates.

First quarter 2007 revenue numbers increased by more than 30% to $63.8 million over 1Q of 2006. The company also reported a return to profitability with a $.10 per share during the first quarter.

Analysts were expecting, or "guessing" might be a more accurate description, revenues of $58.5 million with a loss of $.01 per share.

The company also raised its 2007 forecast to earnings of $0.46-$0.55 a share on revenue of $268.4 million to $278.0 million.

Align stock skyrocketed by more than 33% by day end, as the quarterly report hit investors by surprise. The stock price ended trading at $23.60, blowing past the 52-week high of $17.95!

But is this new price level sustainable?

Taking the company's high end of its expected 2007 earnings, $0.55 per share, the current price would be 42x earning! That is taking the company's best expectations. If we assume a $0.46 per share profit level, the current price would be a hefty 51x earnings.

However, we must consider the fact that most high growth stocks tend to have lofty price to earning ratios. A range of 42 to 51 times earnings is not such an amazing number, as long as Align Technology continues its strong push for getting dentists to use Invisalign in their offices.

Now with the OrthoClear fiasco well behind them, Align Technology executives can focus not only on attracting more dentists from the U.S., but from abroad as well. According to the company's latest data about close to 25% of participating dentists were international, but only 74% submitted multiple cases. In contrast, 88% and 87% of U.S. orthodontists and general practitioners were multile submitting doctors respectively.

A small increase in the percentage of international dentists who submit multiple cases, and the continued growth in U.S. doctors, will at the very least justify the current price level. With another earnings surprise next quarter, and a further raising of the yearly forecast, Align Technology stock could very well cross the $30 a share milestone before the end of 2007.



Disclosure: Dr.Ayoub is a practicing general dentist in South Florida, does not own any position in Align Technology stock, and does not have any affiliation, business or otherwise, with the company.


Source: BioHealth Investor.com



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