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Align Technology Inc. Message Board

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  • deadduckzerosquared23 deadduckzerosquared23 Mar 20, 2006 10:21 PM Flag

    I'd like to add my 2 cents on the P/E ratio analysis. The notion of using a P/E valuation metric for an emerging technology company that is just turning profitable is ridiculous. If you think that pricing is going to continue to deteriorate or OC is going to eat Align's lunch such that Align will never grow revenues from roughly a $200mm annual rate, then that's one thing. Good luck to you if you think that by the way because you'll be proven wrong. But if you haven't drunk the OC koolaid yet, consider thinking about valution on an enterprise value to sales basis. ALGN trades at roughly 2x EV/sales which is a significant discount to its peers. For a company with the potential to post 70% gross margins and 20%+ operating margins not so far down the road, this is very cheap. Obviously the operating leverage hasn't kicked in and won't kick in to a significant degree this year because Align needs to "anniversary" the price cuts that were instituted in 11/05. But by the end of this year, as we look into 2007, we could be looking at 15-20%+ sales growth in 2007 and significant operating leverage. At 4x potential 2007 sales of $250mm+, this could be an $18 stock by year-end. It's not about the past. It's about the future and the future looks pretty bright for ALGN.

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