||Align Technology (ALGN) is a healthcare company that has been on my radar for a few years but always ended up in the
'too hard' pile. At a certain moment, the stock
price was down by almost 50%, but it has recovered somewhat.
But all in all, it is still down almost 35% over the last six months.
In this article, I want to investigate if Align has become attractive
for new investors after the dramatic drop.
That category of 'potential new investors' includes myself.
Align Technology was founded in 1997 and it makes and sells everything related to teeth aesthetics.
Its most famous product is Invisalign, a nearly invisible brace.
For patients with minor misalignment of the teeth, this solution is more comfortable to many because it is 'invisible'.
Invisalign was FDA approved in 1998 and sales started two
years later. But the braces are not the only product.
Align also provides intra-oral scanners, computer-aided design and computer-aided manufacturing digital services.
It combines its scanners more and more in a cloud-based software environment as well.
Align also is the exclusive third-party supplier for SmileDirectClub, a direct-to-consumer company that wants to lower the bars for orthodontics by letting costumers order online, have
a 3D scan at home and send the braces to your door.
This is a fast-growing business. 3B and I think there is an enormous opportunity left on this market.
But Invisalign stays the most important product for Align Technology, generating 90% of its revenue, so most investors and analysts keep focusing on Ivisalign. For years on end,
Align Technology has been a tremendous performer on the stock market.
As you can see, the major gains all have come over the
last five years, but those gains are so substantial, they have put the whole period on fire.
More than 2,000% up starting from 2001, that is an average CAGR of 18.5%,
an outstanding performance. Mostly such a huge drop comes from disappointing earnings.
And although the stock had already lost a bit in the weeks predating the Q3 2018 earnings, the earnings themselves gave the extra impulse for a
big fall. After Align announced its Q3 2018 earnings, the stock plunged.
534.02M, up 26.7% YoY). But again the stock went down initially, although the losses were reversed the next day and the stock has
continued to perform well since. On the surface of the earnings results,
nothing seems wrong: 31.2% and 26.7% up in Q3 and Q4 2018, I
know a lot of executives who would give an arm for those kinds of revenue growth numbers.
But investors and analysts were used to more: in Q1 2018 revenue grew at 41% and in Q2 37%.
Than 31.2% and 26.7% revenue growth feels less great.
Is Align cheap now? Even after the big drop, Align keeps trading at high multiples: ttm P/E of 57, fwd
P/E of 38, P/S of 10.7. These are numbers of high growth stocks.
But does Align live up to this? The guidance revenue rates are between 20% and 22% growth.
That is nothing to sneeze at, but with a forward P/E of 38,
it is rather low. Even if you take 22%, this gives a 'forward PEG'
of 1.73 (38/22), which is not extremely high, but not the chance of your life either.
The other thing that annoys me is competition. The reason the guidance is down is because the company sees more and more competition for
its Invisalign line, even though the management is hesitant to admit
that, focussing on the short-term and ignoring the long term, in my opinion. Is there
any sign of competition being relevant in the field that you can pick out
at this point or still the view that it's just
not material, not something that people ought to be thinking about?
We know some of the docs out there trying these product lines.
And we have access to some of the software that's going on out there and the product lines that they're representing or whatever.
But I don't want to -- I don't diminish it.
But as far as 2019 goes, we're not thinking about any
major competitive issues that we're going to face in any of our key areas or key geographies right now.
We think this will take some time for them to ramp.
We've talked about this before. This business is not easy.
You have to be able to hit on a lot of cylinders.
You got to have a good sales force that touches the customers and can make that doctor feel really strong about the product line.
Secondly, you have to have really good treatment planning and consistent treatment planning that can deliver.
And third, you got to have an operation organization that can deliver these things in sequence and on time and on high quality.
And putting those things together is difficult. And so 2019, we're not factoring in a huge amount of what we think is competitive pressure.
I'm not sure if this is just the exact statement I
want to hear as a potential investor, especially because I tend to invest
for the very long term. Hogan only talks about 2019 and I want to believe him on his word, but what about the longer term?
The company must have an idea or a plan?
At least, that is what I would hope. And the deteriorating gross profit margins don't tell a good story either.
Now the company has some good and reasonable
explanations: expansion in China, sales force expansion and increased legal
expenses. But still, this is not the evolution a
potential investor wants to see. Once competition really becomes tougher, Align will probably have to fight on price too.
That means further deterioration of the margins, bringing them further
down. I don't like what I see here. If Align would have been beaten down by 70%
already, if it would have a forward P/E of 17 or so, I really might
look deeper into it. All of these elements make that Align Technology, even though I like the quality of its management, remains
in my "too hard" pile. If you like my articles, written with a long-term perspective in mind, feel free to hit the follow button next to my name.
In the meantime: keep growing! Disclosure: I/we have no positions in any stocks mentioned, and no plans
to initiate any positions within the next 72
hours. I wrote this article myself, and it expresses my own opinions.
I am not receiving compensation for it (other than from Seeking Alpha).
I have no business relationship with any company whose stock is mentioned in this
To so conclude would leave former employees, like the appellant, in the untenable
position of having no disability coverage from either their former employer or any new employer.
Such a result would be contrary to the very purpose of disability insurance and the plain meaning of the coverage provision. It would be most
unfair, in my view, to permit the imperfect compliance with the 90-day proof of claim
period to defeat the appellant_s claim in the particular circumstances of this case.
The appellant was injured during his employment when he was covered
by a LTD Policy, but did not appreciate the significance
of his injury during his employment.
The respondent has conceded the appellant_s total disability
as of the date of the accident and that he enjoyed
coverage under its policy at the time of his injury.
The appellant left his employment some time after he
was injured but before he was aware of the extent of his injury.
The imperfect compliance with the requirement to file the
proof of claim form may only be a matter of 10 days at most.
His employer and the insurer were aware that he had suffered a serious injury that included a brain injury at the outset.
All of the foregoing facts have been known to the parties for years now.
Although relief from forfeiture pursuant to the provisions of the Insurance Act, R.S.O.
1990, c. I.8, or the Courts of Justice Act, R.S.O.
1990, c. C.43, was not raised at trial, given the facts outlined above,
it is in the interests of justice to grant that relief here.
In any event, in view of this Court_s decision in Kassburg v.
Sun Life Assurance Company of Canada, 2014 ONCA 922 (CanLII), 124 O.R.
171, it is unlikely that the one-year period of limitation would be upheld: see paras.
The only reasonable available conclusion on this record is that
the appellant could not reasonably have appreciated he
had a cause of action until the end of August 2009.
The claim was therefore not discovered until that time.
Even on that basis his action was commenced well within two years of that date.
Trumble v. Manulife (2018) O.S.C.J.
173,000 all-inclusive in exchange for a full and final settlement of the plaintiff_s claim and lawsuit and "a full and final release of Manulife_s choosing, releasing the group policies in question".
The plaintiff refused to sign the clawback clause portion of
the Release and brought a motion to set aside the Order that the
lawsuit be dismissed on the basis the case had not been settled.
Held: For the plaintiff. The motions judge held that the clawback condition was an addition added on by Manulife to what had been agreed to between counsel in their e-mail
exchange settling the lawsuit.
] O.C.J. No. 721) that held that no party
is bound to execute a complex or unusual form of release and
the terms of the release must reflect the agreement reached by the parties.
NOTE: The Trumble decision is unreported with reasons being given orally.
For a transcribed copy of the Decision, please contact Eric.
Wright v. Sun Life Assurance Company of Canada (2019) 300 A.C.W.S.
614 B.C.C.A. on appeal from 2015 B.C.S.C. This decision might be
best summarized as why demanding, non-co-operative plaintiffs should not take LTD
cases to trial and certainly not where such plaintiff decides to self-represent.
The full trial decision runs 248 paragraphs and shows the Court_s obvious dislike
of both the plaintiff and his actions.
Portions of the case are cited below but really only to whet the appetite.
In short, plaintiff counsel should be wary of representing plaintiffs who feel they know more than their medical doctors, who
threaten their own G.P. G.P. does not write a certain letter to the LTD insurer,
and who do not understand why their LTD insurer needs financial records to assess residual disability.
The plaintiff, ("Dr. W"), asserted he was entitled to income replacement benefits under a group
policy of insurance between Sun Life and the Canadian Dental
Association. 1.5 million. Dr. W sought judgement for what he claimed were the
unpaid benefits, as well as aggravated damages and other
relief. Dr. W had elected the "Own Occupation Option" under the Policy.
Regular Occupation for as much time as those duties usually require.
The G.P._s (Dr. Henderson) notes reflect the history he was given about how the Accident occurred, including that Dr.
W told him he landed heavily on his left side and was having "a lot of pain".
There is no mention that Dr. W suffered a concussion, and Dr.
Henderson testified that he would have recorded it if
Dr. W had reported it to him. This would be consistent with Dr.
Henderson_s general practice. Dr. Henderson recorded that (on examination) Dr.
W had considerable bruising on his left arm, a slightly tender left lateral clavicle and also that Dr.
W "had very little abduction". Dr. Henderson encouraged D.
W to use a sling, and wanted him to come back in one week.
On examination, Dr. Henderson noted that D.
W seemed tender over the left radial head (i.e. at the
He ordered an x-ray, which he expected would probably be normal.
He recommended that Dr. W continue to use a sling and to see him
in "two weeks as advised". Dr. W never returned. The x-ray
ordered by Dr. Henderson was normal. According to Dr.
W, despite suffering from his injuries, he returned to work, although only part-time and despite having his left
arm in a sling. He explained that the practice was very busy
just before Christmas, and he needed to be there to look
after patients. With the help of assistants, Dr. W did what he could.
However, according to Dr. W, the pain was becoming worse and he felt that he was unable to perform any
procedures at all. He explained that he had to refer many patients out to other dentists,
and was unable to accept any new patients.
According to D. W, he continued to "limp along" in his practice.
However, according to Dr. W, he realized (although without the benefit
of any advice from or further examination by a physician) after about six weeks that things were not getting
any better. As he recalled, he was having considerable pain in his low
back and his shoulder, and his left arm was still in a sling.
As Dr. W recalled, he was also having headaches and neck pain, and finding it very hard to do even the
minimum amount of dentistry, although he was trying.
According to Dr. W, some of his staff began looking for part-time work because he was
cutting back, and some of his patients were also going to other dentists.
He recalled realizing that if things continued
this way much longer, the goodwill and value of his practice would
evaporate. He explained that he then decided he better put his practice on the market and sell it, or at least get the process underway.
According to Dr. W, around this time (about six or
so weeks after the Accident), he began thinking very seriously about a career change.
According to Dr. W, in 1994, he was still suffering symptoms in his neck,
back, shoulder and arm, which he attributed to the Accident.
Although Dr. Henderson had recommended physiotherapy, and Dr.
W went to the office of a physiotherapist, he never had
any treatment because he felt it would be too painful.
He did not see Dr. Henderson or any other physician between December 30, 1993 and when he left B.C.
California in 1995 to attend school.
Before the Accident, Dr. W had seen a chiropractor,
Dr. Turner, from time to time for treatment for low back pain. In early July 1994, Dr.
W wrote to the Canadian Dental Service Plans Inc.
("CDSPI"), in relation to making a disability claim. Shortly after the sale of the Abbotsford practice,
Dr. W relocated to California. According to Dr. W, he moved
to Thousand Oaks, about an hour_s drive from Los Angeles, and began his prosthodontist program at USC.
Dr. W recalled that, once settled in Thousand Oaks, he saw a doctor, and told him about his problems.
According to Dr. W, he asked such physician for a referral to an orthopedic surgeon, and was referred to a Dr.
As Dr. W recalled, he had chiropractic treatment and physiotherapy at Dr.
Cassar_s clinic in California "for years", until 2001. According to Dr.
W, Dr. Cassar also referred Dr. W to another orthopedic surgeon, Dr.
Larsen. As Dr. W recalled, he saw Dr. Larsen a couple of times or "periodically".
I have no doubt that Dr. W understood that his disability needed to be substantiated medically, and I find that was his reason for seeing Dr.
Larsen and requesting a report from him. However, his delay in providing the information to CDSPI (for
Sun Life) meant that his claim for Total Disability benefits could not
be completely adjudicated.
Dr. W may have felt that he should be receiving benefits without this information (and his correspondence to CDSPI indicates a high level of frustration and unhappiness with the
process). But his own conduct in failing to provide
information that Sun Life was entitled to have under the Policy did nothing to facilitate
his receipt of benefits. Dr. W was also communicating with Sun Life concerning his claim.
As of July 1997, Dr. W had not provided any income tax returns, notices of assessment or other
financial information that Sun Life had requested,
apart from the basic information in his
Preliminary Claim Form.
In a letter dated March 20, 1997, Sun Life
informed Dr. W that the information requested in its December
4, 1996 letter had not been received and renewed its request for this information. Dr.
W sent another letter to Dr. Henderson, dated April 20, 1997.
Again, the letter was threatening and borderline insulting.
"I trust that you will have the wisdom not to be challenging the reports of these highly qualified doctors and will be providing me with your report shortly".
By the end of July, Dr. Henderson had not responded to
Dr. W_s May 26 letter, and Dr. W wrote to Dr. Henderson again on July 26, 1997.
His tone was no longer friendly; rather it was threatening.
100,00 in back payments to me when I most need it". "I sense
your reluctance to write a medical report. Doug, it is a double-edged sword and the choice is yours.
Either you diagnosed my injury and treated it or you failed to diagnose my injury and treat it.
Either my insurance pays or your insurance pays. I
could claim from both but provided that I receive the appropriate medical report from you I shall be disinclined to look beyond my own insurance for compensation".
One of the things Dr. W wanted Dr. Henderson to say was that x-rays showed a compression fracture of the head of
At trial, Dr. W was quite insistent that he had suffered such an injury in the Accident.
However, no such diagnosis was ever made by Dr. Henderson, who had
noted the relevant x-ray as normal. Sun Life wrote again to Dr.
W on September 2, 1997. The letter informed Dr.
W that (as far as Sun Life was concerned) the medical information on his file did not support an earlier date of disability.
Moreover, as of September 1997, Dr. W had not provided any of the tax returns, notices of
assessment or other financial documents
Sun Life had requested. To complete the adjudication of
your claim, Sun Life requires financial documentation, as specified
However, as of the end of June 1998, Dr. W had not provided Sun Life with any of the financial documentation requested, or any other relevant financial information. Dr.
W_s credibility and reliability are significant issues in this case.
The Accident occurred over 20 years ago. With respect to Dr.
W_s injuries from the Accident, there is very little objective evidence.
The medical evidence (from Dr. Henderson and Dr. Keith Christian, one of Sun Life_s experts) strongly suggests that Dr.
W ought to have recovered from the fracture to his left humerus within a period of months.
With respect to Dr. W_s pre-Accident income (an important issue
in relation to his claim for Residual Disability benefits), there is no reliable, contemporaneous, independent evidence: no income tax returns, no notices of assessment.
From the time Dr. W submitted the Preliminary Statement of Claim Form, Sun Life
asked for this information.
I have concluded that Dr. W is neither a credible nor a reliable
witness. The issues in this case are not about whether,
for example, Dr. W has experienced or experiences
disabling back and neck pain, or disabling pain generally.
Rather, with respect to Dr. W_s claim for income
replacement, the question is whether Dr. W is "Totally Disabled" as that term is defined by the Policy.
Similarly, with respect to Dr. W_s claim for income replacement Residual Disability benefits, the question is whether Dr.
W is "Residually Disabled" as that term is defined by the Policy.
I find that, in the Accident, Dr. W suffered a fracture of his left humerus, and had
associated pain and discomfort in his left shoulder,
arm, neck and back.
I find, based on Dr. Christian_s opinion evidence, that the fracture probably healed within a maximum of eight weeks and was
not the cause of any ongoing disability or impairment.
In support of his position, concerning the proper interpretation of the
term that the insured be "under the regular care of a physician", Dr.
W cites Kirkness (Committee of) v. Imperial Life Assurance Co.
of Canada (1993), 12 O.R. 285, 99 D.L.R. (4th) 391 Ont.
In effect, Dr. W argues that his condition was permanent and untreatable,
so being under regular care of a physician was pointless.
However, Kirkness is not the law in B.C. Rather, the leading authorities in B.C.
Rose v. Paul Revere Life Insurance Co. (1991), 62 B.C.L.R.