Stock of the Week

Align Technology Inc. (ALGN) may not sound familiar to you, but I am guessing you have heard of their main product—Invisalign.

That’s right Align Technology is the parent company of the Invisalign teeth-straightening system.

They design, manufacture, and market the system of clear aligner therapy, as well as intra-oral scanners, and computer-aided design and computer-aided manufacturing (CAD/CAM) digital services.

The company is based in San Jose, California and was founded in 1997.

From a fundamental perspective, ALGN has been incredible…

The return on equity is 24.95%, the profit margin is 22.5% and the operating margin is 23.2%. Earnings per share grew by 60% in the most recent quarter and are expected to grow by 58% for the year.

Over the last three years earnings have grown at a rate of 20% per year. Sales have also been growing with last quarter showing growth of 38% and at a rate of 22% over the last three years. Analysts expect the company to continue growing with an estimated annual growth rate of 29.2% over the next five years.

The chart reflects a stock that has been in a strong uptrend for the last two years. The stock spent most of 2017 in overbought territory according to the weekly stochastic readings and the 10-week RSI. A dip in December brought the stock out of overbought territory and looks to be providing a buying opportunity. The last time we saw the stochastic readings near the current level was at the beginning of 2017 when the stock was under $100 a share. It proceeded to rally by over 100 percent from February through October.

Suggested strategy: Buy ALGN with a maximum entry price of $250. I would set a target of at least $350 in the next six months (for a 40% potential return) with a secondary target of $400 for the next 9-12 months (for a 60% potential return). I would also set a stop-loss at $210.

— Rick Pendergraft