The American Dental Association as well as various state dental boards have made an organized attack on SmileDirectClub, Inc. in an effort to protect their turf, but savvy investors should look past Big Dental and focus instead on the orthodontics disruptor’s massive profit potential. That’s according to IPO Edge Editor John Jannarone, who spoke to Cheddar TV ahead of the company’s upcoming quarterly result.
Jannarone cited a detailed analysis published on IPO Edge explaining the thinly-veiled attempts by the ADA to suggest both the Food and Drug Administration and the Federal Trade Commission were investigating SmileDirectClub. In reality, there is no evidence whatsoever of such investigations taking place and the FTC and FDA have been silent on the matter for several months after initial complaints were filed.
“There are really two things that investors should focus on,” Jannarone told Cheddar. “One is that dentists make this system work…every SmileDirectClub patient has a dentist or orthodontist working with him or her. The other thing is that there is a dental lobby that’s powerful and has a history of doing this.”
He also pointed out that there’s a clear analogy with orthodontists and incumbent players in other industries. Taxi drivers, for instance, have often gone to great lengths to protect their business from the likes of Uber Technologies, Inc. and Lyft, Inc.
“The reality is that with any service you will have anecdotal evidence of things going wrong. But the reviews overall are very, very good,” Jannarone continued, referring to reviews on Google and other objective ratings.
“The company is on the cusp of breakeven Ebitda for 2020,” he continued. “If you look at it on a multiple of 2023 numbers it’s very cheap.” Based on consensus estimates from Sentieo, the stock trades at an enterprise value of under 7 times 2023 Ebitda.
Regarding competition, Jannarone pointed out that the company will soon be able to sell its products directly through dentist’s offices, giving it a major advantage over rivals. SmileDirectClub’s main rival, Align Technology, Inc., has also been forced to shutter its standalone retail stores and they will remain closed for some time.
IPO Edge Contact:
John Jannarone, Editor-in-Chief