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Two of my favorite medical-device stocks are Align Technology (NASDAQ: ALGN) and Intuitive Surgical (NASDAQ: ISRG). However, I've liked Intuitive a lot more after Align's share price plunged in the fourth quarter of 2018.
Both stocks are performing relatively well so far this year. But which stock is the better pick for the future? Here's how Align Technology and Intuitive Surgical stack up against each other.
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The case for Align Technology
There are two primary arguments for why investors should consider buying Align Technology. First, the market for clear dental aligners has significant room for growth. Second, Align is in the best position to capitalize on that market opportunity.
The first argument is easy to defend. Most cases of malocclusion (misalignment of teeth) are still addressed using wire-frame braces. However, many dental patients, especially adults, don't want to wear braces that others can see. Clear aligners provide a solution.
Emerging middle classes in developing nations also present a tremendous growth opportunity for clear aligners. In particular, China and India have large populations with individuals who are prime candidates for using clear aligners.
But is Align Technology really in the best position to capitalize on the opportunities? The company has the most extensive network of dental professionals that promote its products in the industry. It has the widest international reach, with operations in major European countries, along with Australia, China, India, Russia, and elsewhere.
Align also continues to launch innovative new products. Its Invisalign Lite clear aligner corrects minor orthodontic issues and is worn for a relatively short amount of time. Invisalign Go helps general practitioner dentists identify, plan, and treat simple teeth alignment issues and integrates with Align's iTero intraoral scanner.
Granted, Align's growth rates are slowing somewhat as the company faces increased competition. The company recently lost an arbitration decision with SmileDirectClub which requires Align to shut down its 12 Invisalign retail stores. However, Align should see revenue growth of 20% or more in 2019 and probably for years to come.
The case for Intuitive Surgical
You can pretty much take the two arguments for buying Align Technology and apply them to Intuitive Surgical. The only change required is to replace the reference to clear dental aligners with robotic surgical systems.
The market for robotic surgical systems should definitely grow significantly in the future. The long-term demographic trend of aging populations around the world will drive the volume of surgical procedures higher. Many of those procedures, including prostatectomies, are ideally suited for robotically assisted surgery.