Align Technology Inc (ALGN, Financial) experienced a daily loss of 4.19%, yet it has seen a 3-month gain of 10.07%. With an Earnings Per Share (EPS) of 6.07, investors are pondering whether the stock is modestly undervalued. This article dives into a valuation analysis to explore the true worth of Align Technology (ALGN) and to provide investors with a clearer picture of its market position.
Company Introduction
Align Technology Inc (ALGN, Financial), a dominant force in the clear aligner market, has a rich history of innovation and market leadership. Its flagship product, Invisalign, controls over 90% of the market and has treated over 14 million patients since its FDA approval in 1998. Additionally, Align Technology sells iTero intraoral scanners, which are integral to the digital treatment planning process. With a current stock price of $292.05 and a GF Value of $333.84, indicating a fair value estimation, the company presents an interesting case for valuation analysis.
Summarize GF Value
The GF Value is a unique measure that reflects the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. When a stock's price significantly deviates from the GF Value line, it suggests potential overvaluation or undervaluation. In the case of Align Technology (ALGN, Financial), with a market cap of $22 billion and a current price of $292.05, the stock appears to be modestly undervalued. This suggests that Align Technology could offer higher long-term returns than its business growth alone might indicate.
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Financial Strength
Investors must consider a company's financial strength to mitigate the risk of permanent capital loss. Align Technology boasts a cash-to-debt ratio of 9.45, ranking higher than 70% of its peers in the Medical Devices & Instruments industry. With an overall financial strength rating of 8 out of 10, Align Technology's financial position is robust, providing a solid foundation for investment consideration.
Profitability and Growth
Profitable companies tend to be safer investments, and Align Technology's consistent profitability over the past decade reinforces this notion. With an operating margin of 17.29%, which surpasses 81.33% of its industry counterparts, and a profitability rank of 10 out of 10, the company's strong profitability is evident. Furthermore, Align Technology's average annual revenue growth rate of 17.4% highlights its capacity to create shareholder value through growth.
ROIC vs. WACC
An essential aspect of evaluating a company's profitability is comparing its Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC). When ROIC exceeds WACC, it indicates value creation for shareholders. Align Technology's ROIC of 9.3 and WACC of 16.23 suggest that the company is effectively generating cash flow relative to its invested capital.
Conclusion
In summary, Align Technology (ALGN, Financial) appears to be modestly undervalued. The company's financial condition is strong, and its profitability is robust. Its growth outperforms 65.14% of companies in the Medical Devices & Instruments industry. For a more detailed exploration of Align Technology's financials, investors can access its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
