Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Align Technology, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 3.8% to 0.5% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 97, DPO 41, DIO 86). At a 7.8% WACC with mid-year discounting, the terminal value (89% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 21.9x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $280.94 per share, suggesting ALGN is undervalued by 58.4% at the current price of $177.36.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 684 | 715 | 757 | 800 | 804 | 824 |
| (−) Net Interest | 84 | 88 | 93 | 98 | 98 | 101 |
| (+) D&A | 218 | 184 | 175 | 191 | 223 | 229 |
| EBITDA | 986 | 987 | 1,024 | 1,089 | 1,125 | 1,153 |
| (−) Tax | 212 | 221 | 234 | 247 | 249 | — |
| (−) CapEx | 235 | 245 | 259 | 274 | 276 | — |
| (−) ΔWC | 2 | 57 | 77 | 79 | 8 | — |
| Free Cash Flow (FCF) | 537 | 464 | 454 | 488 | 593 | — |
| Peers' EBITDA Multiple | 21.9x | |||||
| Terminal Value | 25,237 | |||||
| WACC / Discount Rate | 7.81% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 517 | 414 | 376 | 375 | 423 | 17,327 |
| Enterprise Value | 19,433 | |||||
| Projection Period | 2,106 | 10.8% | ||||
| Terminal Value | 17,327 | 89.2% | ||||
| (−) Current Net Debt | (965) | |||||
| Equity Value | 20,397 | |||||
| (÷) Outstanding Shares | 73M | |||||
| Fair Price | $281 | +58.4% | ||||
| WACC \ EV/EBITDA Exit Multiple | 17.9x | 19.9x | 21.9x | 23.9x | 25.9x |
|---|---|---|---|---|---|
| 5.8% | $258 | $282 | $306 | $330 | $354 |
| 6.8% | $247 | $270 | $293 | $316 | $339 |
| 7.8% | $237 | $259 | $281 | $303 | $325 |
| 8.8% | $228 | $249 | $270 | $290 | $311 |
| 9.8% | $219 | $239 | $259 | $279 | $299 |
Current price: $177.36. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.