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Align Technology Inc. (ALGN)’s third-quarter results did not show much progress towards regaining its old growth momentum, but some small signs of improvement were enough to give shares a recent boost, highlights Doug Gerlach, editor of Investor Advisory Service.

Revenue of $978 billion increased 2%, slightly missing both guidance and analyst estimates. Scanners and Services drove the improvement, up 16%. Clear Aligners dropped 1%, with a modest volume increase more than offset by price erosion.

Align Technology Inc. (ALGN) Chart

Average selling price was held back by a higher mix of Asia-Pacific sales. This is expected to reverse next quarter. More structurally, the company continues to segment its markets and discount its products in various ways, offsetting any natural lift from inflation. This has been a long-standing headwind that should eventually reverse.

Profitability was respectable, particularly in light of the revenue miss. Total gross profit increased 3%. EPS of $1.55 declined 2%. Operating income also declined 2%.

Align will embark on a round of cost cutting and expects to see higher operating margins in Q4 and in 2025. Beyond 2025, margins should improve further due to manufacturing efficiencies and, with hope, leverage from volume growth.

My recommended action would be to consider buying shares of Align Technology.

About the Author

Doug Gerlach is the senior equity analyst with Equity Research Service, a division of the National Association of Investors (NAIC), and editor-in-chief of its stock newsletters, including the award-winning Investor Advisory Service, the market-beating SmallCap Informer, and a dividend-focused newsletter.

NAIC is also the home of the BetterInvesting Stock Selection Guide and other tools for stock analysis including StockCentral.com and MyStockProspector.com. Mr. Gerlach is the author of six books, including Investment Clubs for Dummies and The Armchair Millionaire.

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