Water-Logged And Getting Wetter Stock Of The Day: Align Technology (ALGN)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Align Technology ( ALGN) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Align Technology as such a stock due to the following factors:

  • ALGN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $38.9 million.
  • ALGN has traded 659,912 shares today.
  • ALGN traded in a range 235.7% of the normal price range with a price range of $3.25.
  • ALGN traded below its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on ALGN:

Align Technology, Inc. ALGN has a PE ratio of 35. Currently there are 7 analysts that rate Align Technology a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Align Technology has been 850,800 shares per day over the past 30 days. Align Technology has a market cap of $5.1 billion and is part of the health care sector and health services industry. The stock has a beta of 1.77 and a short float of 8.6% with 9.80 days to cover. Shares are up 13.1% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Align Technology as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and expanding profit margins. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Health Care Equipment & Supplies industry average. The net income increased by 11.5% when compared to the same quarter one year prior, going from $32.44 million to $36.18 million.
  • ALGN's revenue growth trails the industry average of 21.9%. Since the same quarter one year prior, revenues slightly increased by 9.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ALGN 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. Along with this, the company maintains a quick ratio of 2.91, which clearly demonstrates the ability to cover short-term cash needs.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The gross profit margin for ALIGN TECHNOLOGY INC is currently very high, coming in at 78.45%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.26% is above that of the industry average.

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