ALGN Stock Study (11-5-25)

Posted by Mark on February 20, 2025 at 06:55 | Last modified: November 5, 2025 07:25

I recently did a stock study on Align Technology Inc. (ALGN, $135.67). Previous studies are here, here, and here.

CFRA writes:

     > Align Technology, Inc. (ALGN) is a global medical device company
     > engaged in the design, manufacture, and marketing of Invisalign
     > clear aligners and iTero intraoral scanners and services for
     > orthodontics, and restorative and aesthetic dentistry. ALGN
     > also provides exocad computer-aided design and computer-aided
     > manufacturing (CAD/CAM) software for dental laboratories and
     > dental practitioners. ALGN’s products are intended primarily
     > for the treatment of malocclusion or the misalignment of teeth.

Over the past decade, the medium-size company has posted annualized growth of 19.0% and 12.1% for sales and EPS (excluding ’20 and ’21 throughout due to COVID-19: upside outliers that otherwise boost EPS growth rate to 14.7%), respectively. Lines are mostly up, parallel, and flattening with EPS dips in ’22 and ’24. Five- (10-) year EPS R^2 is 0.63 (0.70) and Value Line (VL) gives an Earnings Predictability score of 50.

Over the past decade, PTPM leads peer and industry averages despite trending down from 22.0% (’15) to 15.2% (’24) with a last-5-year mean of 15.9% (three data points). ROE leads peer and industry averages despite falling from 17.6% (’15) to 10.5% (’24) with a last-5-year mean of 13.3% (three data points). Debt-to-Capital is far below peer and industry averages as the company has no long-term debt per VL: last-5-year mean is 3.3%.

Quick Ratio is 1.0 with Interest Coverage N/A (consistent with no long-term debt) per M* who assigns “Narrow” Economic Moat, gives “Standard” rating for Capital Allocation, and C grade for Financial Health (per BI website). VL gives B++ grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 0.6% and 3.8% for ’25 and ’26, respectively (based on 15 analysts).
• Zacks projects YOY 0.6% and 3.7% for ’25 and ’26, respectively (5 analysts).
• VL projects 6.8% annualized growth from ’24-’29.
• CFRA projects 0.8% YOY and 2.7% per year for ’25 and ’24-’26, respectively.
• M* offers 2-year ACE of 1.6%/year and longer-term projects double-digit midcycle growth (analyst note).

My 2.0% forecast is toward the lower end of the range.

With regard to EPS growth:

• MarketWatch projects 8.2% and 12.1% per year from ’24-’26 and ’24-’27, respectively (based on 18 analysts).
• Nasdaq.com projects 9.3% and 11.2% per year for ’25-’27 and ’25-’28 [5 / 5 / 1 analyst(s) for ’25 / ’27 / ’28].
• Seeking Alpha projects 4-year annualized growth of 9.0%.
• Finviz gives ACE 5-year annualized growth of 8.4% (3).
• LSEG estimates LTG at 5.7%.
• YF projects YOY 9.4% and 7.3% for ’25 and ’26, respectively (15).
• Zacks projects YOY 9.4% and 7.3% for ’25 and ’26, respectively (6), along with 5-year annualized growth of 10.1%.
• VL projects 11.8% annualized growth from ’24-’29.
• CFRA projects 7.4% YOY and 8.1% per year for ’25 and ’24-’26, respectively.
• M* has long-term ACE at 15.6% annualized.

My 5.0% forecast is below the long-term-estimate range (mean of six: 10.1%). Initial value is 2025 Q3 EPS of $5.16/share (annualized) rather than ’24 EPS of $5.62.

My Forecast High P/E is 38.0. Over the last 10 years, high P/E ranges from 24.3 in ’20 (included for this calculation and excluding upside outlier of 143 in ’22 instead) to 94.1 in ’17 with a last-5-year mean of 51.7 and a last-5-year-mean average P/E of 42.9 (’20 and ’21 low P/Es excluded). Albeit above my comfort zone, I am less than all but ’20.

My Forecast Low P/E is 21.0. Over the last 10 years, low P/E ranges from 24.6 in ’16 (excluding 5.7 in ’20) to 38.3 in ’18 (excluding 51.0 in ’21) with a last-5-year average of 34.2. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $108.40 is default based on initial value given above. That is 20.1% less than previous close and 11.1% less than the 52-week low.

These inputs land ALGN in the BUY zone with a U/D ratio of 4.4. Total Annualized Return (TAR) is 14.5%.

PAR (using Forecast Average—not High—P/E) of 8.8% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 21 studies (too small for a robust comparison, really) done in the past 90 days (my study and 11 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 5.0%, 12.0%, 30.0, and 20.0, respectively. I am lower on growth rates. VL projects a future average annual P/E of 24.0 that is less than MS (25.0) and much less than mine (29.5).

MS high / low EPS are $10.45 / $5.93 versus my $7.17 / $5.16 (per share). My high EPS is less due mainly to a lower growth rate. VL’s high EPS of $14.50 soars above both (thereby offsetting the 29.5 from above).

MS LSPF of $108.30 implies a Forecast Low P/E of 18.3 versus the above-stated 20.0. MS LSPF is 8.7% less than the default $5.93/share x 20.0 = $118.60 resulting in more conservative zoning. MS LSPF is a dime (0.1%) less than mine.

Despite not forecasting the same degree of multiple contraction, I think MOS is solid in this study because my growth rate is below analyst/MS estimates. My forecast P/E is near/below historical ranges. In support is MS TAR (19.8%) exceeding mine by 5.3% per year.

With regard to valuation, PEG is 1.4 and 5.1 (low growth rate) per Zacks and my projected P/E, respectively: significantly overvalued (81 per M* is not consistent with the 15.6% growth rate from BI website). Relative Value [(current P/E) / 5-year-mean average P/E] is quite low at 0.62 and the “quick and dirty DCF” calculates the stock to be 55% undervalued.

Per U/D, ALGN is a BUY under $149/share. BI TAR criterion is met [272.5 / ((14.87 / 100 ) +1 ) ^ 5] ~ $136 with a forecast high price ~$272.

Full disclaimer: I currently own shares of ALGN.

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