Align Technology, Inc.ALGNNASDAQ

Overview Intelligence Charts News Fundamentals DCF Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $148.06 per share(market-calibrated)

-20.9%

Upside to Fair Value

Current

$187.22

Pure Model

$135.01

Fair Value

$148.06

Bull Case

$161.40

Bear Case

$108.30

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

Unreachable

Calibrated Growth

75/25 blend

Market price implies assumptions beyond model range. Fair value blends 75% model / 25% market price.

What's Driving This Ratingfor ALGN

↓

CapEx normalizing toward maintenance

Historical CapEx is 4.89% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$81M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 17.91% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $1.1B (19.45% margin).

→

Moderate revenue growth

Analyst consensus projects 3.81% revenue growth, fading to 3.00% by Year 10. Revenue reaches $5.8B (vs $4.0B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $86.53/share (10.7x terminal FCF) while exit multiple gives $183.49/share (42.5x terminal FCF). The 24x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

⚠

Market price exceeds model's maximum

Even with the most optimistic terminal growth the model allows, it can't reach $187.22. The market is pricing in factors beyond the DCF framework — possibly optionality, brand premium, or expectations of margin/growth inflection not yet in analyst estimates.

→

Moderate cash flow conversion

Year 10 FCF/EBITDA conversion is 56.42% — acceptable but leaves room for improvement. High reinvestment needs consume a meaningful portion of operating cash flow.

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.83

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)12.74%

Cost of Debt

Pre-tax Cost of Debt0.00%

Tax Rate29.89%

After-tax Cost of Debt0.00%

Equity Weight (E/V)99.40%

Debt Weight (D/V)0.60%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (99.40% × 12.74%) + (0.60% × 0.00%)

= 12.66%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$4.2B	$4.6B	$5.0B	$5.3B	$5.8B
EBIT	$750M	$830M	$924M	$1.0B	$1.1B
Tax	$224M	$248M	$276M	$303M	$340M
NOPAT	$526M	$582M	$648M	$710M	$797M
+ Depreciation	$108M	$120M	$130M	$138M	$151M
- Capex	$205M	$212M	$215M	$212M	$205M
- Δ NWC	$15M	$26M	$15M	$16M	$17M
Free Cash Flow	$414M	$463M	$548M	$621M	$727M
Discount Factor	0.888	0.699	0.551	0.434	0.304
Present Value	$368M	$324M	$302M	$269M	$221M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$727M

Terminal Growth Rate3.00%

WACC12.66%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$7.7B

PV of Terminal Value$2.4B

Exit Multiple Method

Year 10 EBITDA$1.3B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$30.9B

PV of Terminal Value$9.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$2.9B

PV of Terminal Value$2.4B

Enterprise Value$5.3B

(-) Net Debt-$1.0B

Equity Value$6.3B

Shares Outstanding73M

Price per Share$86.53

Exit Multiple Method

PV of Projected FCFs$2.9B

PV of Terminal Value$9.4B

Enterprise Value$12.3B

(-) Net Debt-$1.0B

Equity Value$13.3B

Shares Outstanding73M

Price per Share$183.49

Pure Model Fair Value

$135.01

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
10.66%	$156.77	$158.19	$159.80	$161.64	$163.74
11.66%	$144.24	$145.29	$146.46	$147.77	$149.26
12.66%	$133.34	$134.13	$135.01	$135.97	$137.05
13.66%	$123.76	$124.36	$125.03	$125.76	$126.56
14.66%	$115.26	$115.73	$116.25	$116.81	$117.42

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$108.30

-42.2% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 2.29

Base Case

$135.01

-27.9% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.83

Bull Case

$161.40

-13.8% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.56

Key Assumptions & Drivers• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth3.81%

Year 3 Revenue Growth5.96%

Year 5 Revenue Growth3.00%

Year 7 Revenue Growth3.00%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin17.91%

Terminal EBIT Margin20.00%

Tax Rate29.89%

Historical Capex / Rev4.89%

Terminal Capex / Rev3.50%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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