Alphatec Holdings (ATEC): A Modestly Undervalued Gem in the Medical Technology Sector
Alphatec Holdings Inc (NASDAQ:ATEC) is a medical technology company that focuses on the design, development, and advancement of products for the surgical treatment of spinal disorders. Despite recent market fluctuations, with a daily loss of 6.89% and a 3-month loss of 7.19%, the company remains a strong contender for investment. With a Loss Per Share of 1.51, the question arises: is this stock modestly undervalued? This article aims to answer this question through a detailed valuation analysis.
Company Overview
Alphatec Holdings (NASDAQ:ATEC) is a pioneer in the medical technology industry, specializing in the surgical treatment of spinal disorders associated with disease, degeneration, congenital deformities, and trauma. The company's market cap stands at $1.70 billion, with a stock price of $14.2 per share. This price is compared against the GF Value of $17.79, indicating that Alphatec Holdings may be modestly undervalued.
Understanding GF Value
The GF Value is a proprietary measure that represents the intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Alphatec Holdings' stock shows signs of being modestly undervalued based on the GF Value calculation. With the company's current price of $14.2 per share and a market cap of $1.70 billion, the long-term return of its stock is likely to be higher than its business growth.
Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, it's crucial to assess a company's financial strength before investing. Alphatec Holdings has a cash-to-debt ratio of 0.21, ranking worse than 85.87% of companies in the Medical Devices & Instruments industry. This indicates that the financial strength of Alphatec Holdings is poor.
Profitability and Growth
Investing in profitable companies is less risky, especially those with consistent profitability over the long term. Alphatec Holdings has been profitable 0 over the past 10 years. Its operating margin is -32.46%, which ranks worse than 65.09% of companies in the Medical Devices & Instruments industry. This indicates poor profitability.
Growth is a critical factor in a company's valuation. Alphatec Holdings' 3-year average revenue growth rate is better than 70.34% of companies in the Medical Devices & Instruments industry. However, its 3-year average EBITDA growth rate is -10.2%, ranking worse than 77.09% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. Alphatec Holdings' ROIC is -39.94, while its WACC is 7.04. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders.
Conclusion
In summary, Alphatec Holdings (NASDAQ:ATEC) appears to be modestly undervalued. The company's financial condition and profitability are poor, and its growth ranks worse than 77.09% of companies in the Medical Devices & Instruments industry. However, given its current valuation, the long-term return of its stock is likely to be higher than its business growth. For more information about Alphatec Holdings stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
