ALIGN TECHNOLOGY INC (NASDAQ:ALGN) Identified as a Decent Value Stock with Strong Fundamentals and Growth Potential

ALIGN TECHNOLOGY INC (NASDAQ:ALGN) has been recognized by a "Decent Value" screening method, focusing on stocks with solid fundamental valuations while maintaining good profitability, financial stability, and growth potential. This method follows value investing principles, where investors look for companies trading below their true worth but still showing strong business fundamentals. The aim is to find undervalued opportunities where the market might not fully recognize a company's long-term prospects.

Key Strengths of ALGN According to the Fundamental Report

1. Attractive Valuation (Score: 7/10)

ALGN's valuation metrics indicate it is trading at a lower price compared to its industry peers and the broader market. Key points include:

• Price/Earnings (P/E) Ratio of 14.84, well below the industry average of 27.76 and the S&P 500 average of 27.03.
• Price/Forward Earnings of 12.18, lower than 87.7% of its sector peers.
• Enterprise Value/EBITDA and Price/Free Cash Flow ratios also show undervaluation, ranking better than 88-89% of competitors.

For value investors, these metrics suggest ALGN is priced cautiously despite its strong fundamentals, offering a potential safety net—a key principle of value investing.

2. Strong Profitability (Score: 8/10)

Profitability is vital for value stocks, as it ensures the company can maintain earnings and invest in growth. ALGN performs well here:

• Return on Assets (6.71%) and Return on Equity (10.79%) place it in the top 15% of the Health Care Equipment & Supplies industry.
• Operating Margin of 16.45% beats 86% of peers, while its Gross Margin of 69.92% is among the best in the industry.
• Consistent positive earnings and cash flow over the past five years highlight financial reliability.

High profitability lowers the risk of a "value trap," where a stock seems cheap but lacks earning potential.

3. Solid Financial Health (Score: 8/10)

A strong balance sheet is essential for enduring economic challenges. ALGN shows:

• No outstanding debt, removing interest costs and default risk.
• Altman-Z Score of 4.27, far above the distress level, indicating minimal bankruptcy risk.
• Share count reduction over the past five years, reflecting efficient capital use.

Financial stability ensures the company can maintain operations and reward shareholders without relying on heavy borrowing.

4. Consistent Growth (Score: 5/10)

While not a rapid-growth stock, ALGN displays steady progress:

• Revenue growth of 10.69% annually in recent years, with expected forward growth of 7.34%.
• EPS growth of 11.91% historically, projected to continue at 12.92%.

Moderate growth supports the idea that ALGN is undervalued relative to its future earnings potential.

Why This Matters for Value Investors

Value investing relies on finding stocks where the market price does not match the company's true value. ALGN’s mix of low valuation multiples, high profitability, and financial strength makes it an appealing choice. The lack of debt and strong margins offer protection against downturns, while steady growth hints at potential price gains as the market adjusts to its undervaluation.

For a closer look at ALGN’s fundamentals, check the full fundamental analysis report here.

Find More Undervalued Stocks

ALGN was spotted using a structured screening process. Investors looking for similar opportunities can explore the Decent Value Stocks screener for more stocks that fit these criteria.

Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. Always conduct your own research or consult a financial advisor before making investment decisions.