DCF Studio

    ALGN · NMS · Healthcare

    Align Technology, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 78.08

    Market price

    USD 147.61

    Implied upside

    -47.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Value Per Share

    Perpetuity growth
    USD 78.08-47.1%
    Exit multiple
    USD 126.47-14.3%
    Market price
    USD 147.61

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m260m520mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 4.1bnUSD 4.2bnUSD 4.4bnUSD 4.5bnUSD 4.6bn+2.6%
    EBITUSD 681.3mUSD 699.1mUSD 717.3mUSD 736.1mUSD 755.3m+2.6%
    NOPATUSD 538.2mUSD 552.3mUSD 566.7mUSD 581.5mUSD 596.7m+2.6%
    Add depreciation & amortisationUSD 171.5mUSD 176.0mUSD 180.6mUSD 185.3mUSD 190.1m+2.6%
    Less capital expenditureUSD -184.7mUSD -189.6mUSD -194.5mUSD -199.6mUSD -204.8m+2.6%
    Less increase in working capitalUSD -55.8mUSD -57.3mUSD -58.8mUSD -60.3mUSD -61.9m+2.6%
    Free cashflow to firmUSD 469.1mUSD 481.4mUSD 494.0mUSD 506.9mUSD 520.1m+2.6%
    Discount factor0.94160.83480.74020.65630.5819-
    Present valueUSD 441.8mUSD 401.9mUSD 365.6mUSD 332.6mUSD 302.6m-9.0%
    Present Value Of The ForecastUSD 1.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.431Reported 1.643, pulled toward 1.0 (Blume)
    Cost of equity12.87%Risk-free + beta x equity risk premium
    Cost of debt7.00%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 10.5bn98.9% of capital
    Total debtUSD 114.4m1.1% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC12.79%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 78.08

    61% of EV

    Forecast FCFF, final year
    USD 520.1m
    Capex at depreciation, working capital in reinvestment
    USD 596.7m
    Less reinvestment at g/ROIC (17.8% of NOPAT)
    USD -106.3m
    Capitalised
    USD 490.4m
    ROIC (reported)
    14.0%
    Terminal value, undiscounted
    USD 4.9bn
    Terminal value, discounted
    USD 2.8bn
    Enterprise value
    USD 4.7bn
    Less net debt
    USD -980.5m
    Equity value
    USD 5.7bn

    Exit at 11.6x EBITDA

    Value per shareUSD 126.47

    78% of EV

    Terminal value, undiscounted
    USD 10.9bn
    Terminal value, discounted
    USD 6.4bn
    Enterprise value
    USD 8.2bn
    Less net debt
    USD -980.5m
    Equity value
    USD 9.2bn

    Spread between methods: 47%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    10.79%90.5991.5992.6993.9095.26
    11.79%83.3283.9384.6085.3286.11
    12.79%77.3377.6978.0878.4978.92
    13.79%72.3272.5172.7172.9173.12
    14.79%68.2568.3968.5468.6968.84

    Outlined: this model. Green text: above today's price of 147.61. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year2.6%31.2%+28.6pp
    EBIT margin16.5%33.2%+16.7pp
    Discount rate12.8%7.3%-5.5pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.