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Align Technology, Inc. (ALGN) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Align Technology, Inc. (ALGN)

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Intrinsic Value (DCF)

Current$171.47
→
Intrinsic$180.67
+5%
$127.37$180.67$281.97
Market implies 9% growth for 5 years
ALGN appears fairly valued — current price aligns with our DCF estimate.
At $171, the market prices in 9% annual cash flow growth — a moderate expectation aligned with historical trends (11%).
Range: Bear $127 → Bull $282. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →7%9%11%13%
8%$213$231$250$271
10%$155$167$181$195
12%$123$132$142$153
14%$102$110$117$126

Bull Case

  • Bull case ($282) offers 64% upside at 13% growth, 9% discount
  • 5% margin of safety vs. base case estimate
  • Market-implied growth (9%) ≤ historical CAGR (11%)

Bear Case

  • Bear case ($127) implies 26% downside at 9% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$689.20M
Year 2$762.87M
Year 3$844.41M
Year 4$934.66M
Year 5$1.03B
Terminal$15.22B

📐 Model Inputs

Growth Rate10.7%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$622.65MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is ALGN stock undervalued or overvalued?
🟡 FAIRLY VALUED

ALGN trades at $171.47, within 10% of our $180.67 intrinsic value estimate. At 10.0% WACC and 10.7% FCF growth, the market is pricing in assumptions roughly aligned with the 5-year historical CAGR. The valuation range spans $131.42 (bear) to $248.14 (bull).

What is ALGN's intrinsic value?

Using a 5-year DCF model: Base FCF of $623M, projected at 10.7% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-925M net debt and dividing by 0.07B shares: Bear $131.42 | Base $180.67 | Bull $248.14. Current price $171.47 implies +8% to base case.

How is ALGN's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 10.7% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($12.62B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 20.3x.