ALIGN TECHNOLOGY INC (NASDAQ:ALGN) Presents a Compelling Value Case with Strong Fundamentals

The search for undervalued companies with solid basic business foundations is a key part of value investing. This approach involves finding stocks trading for less than their real worth, often identified through basic analysis of financial condition, earnings, and future possibilities. One way to simplify this search is by using screening tools that sort for stocks with good valuation numbers while keeping acceptable scores in other important areas. A "Decent Value" screen, for example, focuses on companies with high valuation scores, meaning they may be priced low compared to similar companies or their own earnings ability, while still having suitable levels of earnings, financial condition, and expansion.

Valuation Numbers

A main reason ALIGN TECHNOLOGY INC (NASDAQ:ALGN) is found on a value-focused screen is its notable valuation. The company's stock is not just low-priced in simple terms but is also valued well compared to its field and the wider market. For value investors, a low valuation is the first sign, hinting the market may not see the company's actual value.

• The stock's Price-to-Earnings (P/E) ratio of 13.65 is seen as a fair valuation by itself but is especially interesting when measured against its field, with 88% of companies in the Health Care Equipment & Supplies field having a higher price.
• Its forward P/E ratio of 11.63 points to a sensible valuation and is less expensive than 91% of its field competitors.
• When compared to the S&P 500's average P/E of 27.53, ALGN's valuation seems much less expensive.
• The company also does well in other valuation measures, being less expensive than 88% of the field based on Enterprise Value to EBITDA and less expensive than 93% based on its Price-to-Free Cash Flow ratio.

Financial Condition

A low stock price is not attractive if the company has a lot of debt or faces money troubles. For a value investor, a good financial health score gives an important safety net, a protection against errors or unexpected problems. ALIGN TECHNOLOGY shows a strong financial state, which reduces the dangers often linked to very low-priced stocks.

• A main positive is the company's balance sheet, which has no debt. This puts it with the top in its field for being debt-free and removes worries about interest costs and borrowing again.
• The company's Altman-Z score of 4.03 shows no close risk of failure and is higher than 75% of its field.
• While its current and quick ratios are not as high as the field average, they stay at levels that suggest the company should not have major issues paying its short-term bills.

Earnings

An undervalued company must also be a profitable one for it to be a real value find. A high profitability score means that the company has a workable business plan and is good at turning sales into profit. This is needed for the value investor's idea that the market will in time see and fix the low valuation. ALIGN TECHNOLOGY does well here, showing it is a basically sound business.

• The company has been regularly profitable, reporting positive income and operating cash flow in each of the last five years.
• Its Return on Invested Capital (ROIC) of 10.50% is very good, doing better than 91% of the field and showing good use of money.
• ALGN keeps good margins, with a Profit Margin of 11.04% (higher than 85% of similar companies) and an Operating Margin of 16.14% (higher than 86% of similar companies).

Expansion Outlook

While pure value investing can sometimes include companies that are not growing, including a suitable expansion score helps find companies that are not only low-priced but also have the ability to increase their income, thus creating a reason for the stock price to rise. ALIGN TECHNOLOGY shows a varied but generally suitable expansion picture for a value pick.

• The company has shown good past expansion, with Revenue increasing at an average yearly rate of 10.69% over recent years and Earnings Per Share increasing at 11.91%.
• Looking ahead, experts predict a strong EPS increase of almost 11% per year, though Revenue increase is expected to be a slower 6.61%.

For investors interested by this mix of value and basic strength, the search for similar chances can go on. The Decent Value Stocks screen used to find ALGN can be used to see more companies that fit these points. A closer look at the full basic analysis for ALIGN TECHNOLOGY INC is in its detailed fundamental report.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any securities. The information presented should not be used as the sole basis for making any investment decision. Always conduct your own due diligence and consult with a qualified financial advisor before making any investment.