Align Technology Inc (ALGN)

Conclusion

Align Technology designs and sells Invisalign clear aligners, Vivera retainers and iTero intraoral scanners for dental and orthodontic professionals. At a price of 174.26 USD on 2026-11-09, its market capitalisation is 12.3 billion USD and its enterprise value is 11.3 billion USD.

The verdict is undervalued. The current price-to-earnings ratio of 25.0 compares with a ten-year median of 45.1, and enterprise value to EBITDA of 15.2 compares with a median of 30.0. The fair value band runs from 226.81 to 340.22 USD with a midpoint of 283.52 USD, giving a margin of safety of 62.7% at the current price. The discounted cash flow gives 123.93 USD per share, and the fair value from historical multiples is 443.10 USD. The reverse DCF implies growth of 14.0% a year, while revenue grew 10.3% a year over five years and free cash flow per share grew 1.1% a year over the same period.

The case is held up by net cash (net debt to EBITDA of -1.34), free cash flow conversion of 143.3% over the last twelve months, and an Altman Z-score of 5.02. The case would break on three weak numbers: ROIC of 14.1% sits close to a WACC of 13.5%, EPS has fallen at a compound 24.1% a year over five years, and analysts have cut both the current-year and next-year estimates with no upward revisions in the last 30 days.

Financial health

Financial strength is green, supported by a net cash position, a current ratio of 1.42 and an Altman Z-score of 5.02. The current ratio is 1.42 and the quick ratio is 1.21, both at 2026-09-30. Net debt to EBITDA is -1.34 on a trailing basis, which means net cash, and debt to equity is 0.034. Interest coverage is not available because the company does not report its interest expense. The Altman Z-score of 5.02 falls in the safe zone, but that model was designed for manufacturers, so read it with that in mind. Insolvency risk: low, about 0.2% by the estimate of the Ohlson model over one to two years.

Earnings quality

Earnings quality is green, held up by free cash flow conversion of 143.3% over the last twelve months and a share count that fell at a compound 1.7% a year over five years. Five-year free cash flow conversion is 114.9%, and the accrual ratio is -2.9%, which points to cash earnings rather than accounting accruals. Stock-based compensation equals 2.0% of revenue, leaving free cash flow after stock compensation of 621.63 million USD. The Piotroski score is 6 of 8 evaluable tests passed. The Beneish M-score reading is not available in the data. The company beat earnings estimates in 5 of the last 8 quarters, with an average surprise of 4.5%. However, analysts have made 11 downward revisions to the current-year estimate and 12 to the next year in the last 30 days, with none upward.

Profitability

Profitability is green, with the operating and net margins assessed as good, but ROIC is only just above its cost of capital. Gross margin is 67.6% against a ten-year median of 71.9%, operating margin is 15.0% against 19.9%, and net margin is 11.8% against 16.6%. ROIC is 14.1% against a WACC of 13.5%, a ROIC minus WACC value of 0.63%, which is assessed as neutral. The five-year median ROIC is 16.2%. Return on equity is 11.4%, and the DuPont split shows a net margin of 10.2%, an asset turnover of 0.65 and an equity multiplier of 1.54. Leverage therefore contributes little to the return on equity, which comes mainly from margins.

Growth

Growth is yellow, with revenue growth assessed as good but EPS growth as bad. Revenue compounded at 2.6% a year over three years, 10.3% over five years and 16.9% over ten years, and revenue grew in 9 of 10 comparable years. EPS compounded at 7.0% over three years, fell at 24.1% a year over five years, and grew at 12.3% over ten years. Free cash flow per share grew at 24.2% over three years, 1.1% over five and 11.6% over ten. Next-year EPS growth is estimated at 10.8%, but recent estimate revisions have been negative.

Valuation

Valuation is green, and the verdict is undervalued. Current multiples are a price-to-earnings of 25.0 against a ten-year median of 45.1 (premium of -44.6%), enterprise value to EBITDA of 15.2 against 30.0 (-49.5%), price to free cash flow of 17.4 against 50.1 (-65.2%), price to sales of 3.0 against 7.5 (-60.7%) and price to book of 2.9 against 9.8 (-71.0%). The discounted cash flow gives 123.93 USD per share, using a discount rate of 13.59% and a long-term growth rate of 2.5%. The reverse DCF implies growth of 14.0%, against revenue growth of 10.3% and free cash flow per share growth of 1.1% over five years. The fair value band is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, and is not a price target. The company pays no dividend.

Risks

A fall in ROIC towards the WACC of 13.5% would leave little return above the cost of capital, and the 14.1% level already sits close to it. The five-year decline in EPS and the negative estimate revisions suggest that the reverse DCF growth of 14.0% may be hard to deliver. Lower margins against their medians would weaken the cash flow the valuation depends on. The company does not report its interest expense, so interest coverage is not available, and the cost of debt is assumed. The Beneish reading is not available. The analysis has no debt maturity schedule and no revenue by segment, so refinancing risk and the mix between clear aligners and imaging systems cannot be assessed here.