In almost all industries the one thing that continues to drive gains is innovation. Take the car industry as an example: Compare the Model T of 100 years ago to the highest quality Tesla electric car. The changes are stunning, and while 100 years is a long time, the changes are still staggering. One industry where innovation has continued to help make consumers lives better, and in some cases last longer, is medical technology.

Stifel’s medical technology team recently visited with three top companies in their coverage universe. All three are leaders in the specific med-tech silos they occupy and are acknowledged by most on Wall Street as the preeminent firms in their space.

The analysts have updated their research on the companies, and all remain Buy rated. While better suited for aggressive growth accounts, they all could supply strong alpha performance in 2018.

Align Technology

This stock has been on fire over the past year and a recent pullback could be offering investors a great entry point. Align Technology Inc. (NASDAQ: ALGN) designs, manufactures and markets a system of clear aligner therapy, intra-oral scanners and computer-aided design and computer-aided manufacturing (CAD/CAM) digital services for use in dentistry, orthodontics and dental records storage in the United States and internationally.

The company’s Clear Aligner segment offers Invisalign Full, a treatment used for a range of malocclusion. Its Invisalign Teen treatment addresses orthodontic needs of teenage patients, such as compliance indicators, compensation for tooth eruption and six free single arch replacement aligners. And its Invisalign Assist treatment is for anterior alignment and aesthetically-oriented cases.

The Scanners and Services segment offers iTero Scanner, a single hardware platform with software options for restorative or orthodontic procedures, and Restorative software for iTero, a software for GPs, prosthodontists, periodontists and oral surgeons. It also provides Orthodontic software for iTero, a software for orthodontists for digital records storage, orthodontic diagnosis, Invisalign digital impression submission and for the fabrication of printed models and retainers.

Stifel remains positive on the shares and its research report noted this:

We continue to believe that International, Teen and the non-comprehensive Adult market offer Align significant long-term growth opportunities. Internationally, the company expects to grow through breadth and depth. Align’s CFO John Morici spoke to ongoing traction in China, Japan and EMEA, while certain Greenfield markets (India and Brazil) should play a bigger role in coming years. Furthermore, Morici highlighted that Align’s global supply chain effort is just underway, which should further aid international growth in coming years.

The Stifel price target for the shares, which have traded in a stunning 52-week range of $88.56 to $266.41, is $265. The Wall Street consensus price objective is $273.73, and shares closed on Friday at $233.55.

Edwards Lifesciences

This company pioneered the artificial heart valve, and it could be poised for big growth. Edwards Lifesciences Corp. (NYSE: EW) provides products and technologies to treat structural heart disease and critically ill patients worldwide. The company offers transcatheter heart valve therapy products, comprising transcatheter aortic heart valves and their delivery systems for the nonsurgical replacement of heart valves.

Edwards Lifesciences also provides surgical heart valve therapy products, such as pericardial valves for aortic and mitral replacement, and minimally invasive aortic heart valve system, as well as tissue heart valves and repair products, which are used to replace or repair a patient’s diseased or defective heart valve.

Top Wall Street analysts feel that the company’s acquisition of privately held CardiAQ last year made good sense going forward. CardiAQ has human implants of transcatheter mitrial valves, and Edwards is focused on the mitrial valve opportunity after its very strong success in aortic valves.

The company has also had tremendous success with transcatherter valve replacement. These are rapidly gaining favor in the medical community for use in those patients who are deemed unsuited for open heart surgery, and they are a fast-growing revenue stream for the company.

Stifel has been positive on the stock for some time and noted this:

Consistent with the positive commentary at the recent NYC Analyst Day (December 7th), management remains highly positive on the outlook for transcatheter aortic valve replacement (TAVR)market adoption. “Medicine changes slowly, which means TAVR growth will continue for a long time.” said CEO Mike Mussallem. And, TAVR adoption is expected to be further aided by continued technology advancements. Management highlighted the upcoming S3 Ultra introductions in European Union and US as key for both improving the procedure and continuing the march towards Paravalvular leak obliteration.

The $130 Stifel price target is about the same as the consensus target of $130.33. The shares closed last Friday at $114.22, in a 52-week trading range of $86.55 to $121.45.

Intuitive Surgical

This stock has been a momentum traders dream over the past few years, and the company recently awarded shareholders with a three-for-one stock split.

Intuitive Surgical Inc. (NASDAQ: ISRG) designs, manufactures and markets da Vinci surgical systems and related instruments and accessories. Its da Vinci surgical system translates a surgeon’s natural hand movements, which are performed on instrument controls at a console into corresponding micro-movements of instruments positioned inside the patient through small incisions or ports.

The company’s da Vinci surgical system include surgeon’s consoles, patient-side carts, 3-D vision systems, da Vinci skills simulators and Firefly fluorescence imaging products that enable surgeons to perform various surgical procedures, including gynecologic, urologic, general, cardiothoracic and head and neck surgical procedures.

One of the biggest reasons the stock has jumped is because of its success in hernia operations. While robotic assistance for that operation still seems to have a lot of room to grow, it’s important to remember that the market is a forward-looking machine. In addition, there are other procedures where the da Vinci robotic surgical system could add value, and the company has delighted investors with huge profit growth.

Stifel analysts noted this:

As is typical, in early January, the company will provide some preliminary fourth quarter results and 2018 procedure growth guidance. Commenting on potential 2018 procedure growth puts and takes, management suggested that several swing factors are likely to drive a wider procedure growth guidance range than has been typical in the past. Over the last two years, initial guidance was 9-12%. These potential swing factors could include China: where the company is on a robot quota system that drives the number of da Vinci systems sold. Given the high utilization of da Vinci placed systems in China, future quota timing and magnitude could have a wide-ranging impact on procedure volumes.

Stifel has a price target of $400, and the posted consensus figure is $376.50. The stock closed on Friday at $369.87, in a 52-week range of $208.24 to $404.05.

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These three red-hot companies continue to dominate their specific spheres of the medical technology world. Their stocks have had outstanding runs, so it may make sense to buy partial positions now and see if 2018 doesn’t finally bring a pullback in the market.

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