ALIGN TECHNOLOGY INC (NASDAQ:ALGN) Presents a Compelling Case for Value Investors

ALIGN TECHNOLOGY INC (NASDAQ:ALGN) has been identified through a screening strategy focused on finding stocks with good fundamental valuations while keeping good scores in profitability, financial health, and growth. This approach fits with core principles of value investing, which stress buying securities trading below their intrinsic value while making sure the underlying business shows sound operational and financial traits. By filtering for a high valuation rating, indicating possible undervaluation, along with good scores in other important areas, the strategy seeks to lower risk while setting up for possible price improvement as the market corrects mispricings over time.

Valuation Metrics

ALIGN TECHNOLOGY’s valuation metrics are a main reason for its inclusion in the screen. The company’s current valuation indicates it might be trading below its intrinsic value, a key point for value-oriented strategies. According to the fundamental analysis report, the stock shows:

• A Price/Earnings ratio of 13.96, cheaper than nearly 88% of its industry peers.
• A Forward P/E of 11.90, which is not only favorable relative to the industry but also below the S&P 500 average.
• Good Enterprise Value/EBITDA and Price/Free Cash Flow ratios, each doing better than over 88% and 91% of sector competitors, respectively.

These metrics are important within a value framework because they help find differences between market price and fundamental worth, offering a potential margin of safety, a concept central to value investing.

Financial Health

A strong financial health profile lowers the risk often linked with undervalued stocks, which can sometimes face liquidity or solvency problems. ALIGN TECHNOLOGY does well here, with a health rating of 7 out of 10. Notable strengths include:

• Zero outstanding debt, putting it in the top performers in its industry for solvency.
• A solid Altman-Z score of 4.11, showing low bankruptcy risk and doing better than nearly 75% of peers.
• A steady reduction in shares outstanding over recent years, pointing to efficient capital management.

For value investors, financial stability is essential; it makes sure the company can withstand market volatility while continuing to operate effectively, protecting the investor’s principal.

Profitability

Profitability is another area where ALIGN TECHNOLOGY does well, scoring a 7 out of 10. The company’s ability to generate returns is clear through:

• A Return on Invested Capital (ROIC) of 10.50%, doing better than over 91% of industry competitors.
• Strong profit margins, including an 11.04% net margin and 16.14% operating margin, each ranking in the top quartile of the sector.
• Consistently positive earnings and cash flow over the past five years.

High profitability not only supports the company’s intrinsic value but also provides a buffer against economic downturns, a vital trait for long-term value investments, as it points to sustainable competitive advantages and efficient management.

Growth Prospects

While growth is often secondary in pure value strategies, a reasonable growth profile can speed up the convergence of market price with intrinsic value. ALIGN TECHNOLOGY holds a growth rating of 5, supported by:

• Historical EPS growth averaging nearly 12% annually over recent years.
• Expected future EPS growth of around 11%, suggesting continued upward momentum.
• Revenue that has grown at an average annual rate of over 10% in the past, though near-term growth has slowed.

This balanced growth outlook supports the investment case, as it implies the company is not stagnant and may have potential to increase its intrinsic value over time.

Conclusion

ALIGN TECHNOLOGY INC presents a strong case for value investors, mixing an attractive valuation with good fundamentals in health, profitability, and growth. The stock’s screening results, highlighting undervaluation alongside operational strength, suggest it may be well-set for future re-rating as the market recognizes its full potential.

For readers interested in exploring similar investment opportunities, additional results from this “Decent Value” screen can be accessed here.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should conduct their own research and consult with a qualified financial advisor before making investment decisions.