Reassessing Alphatec Holdings (ATEC) After A 39% Year-To-Date Share Price Pullback

• If you are wondering whether Alphatec Holdings is attractively priced or just looks cheap on the surface, you are in the right place.
• The share price closed at US$12.66 recently, with returns of 2.6% decline over 7 days, 6.3% decline over 30 days, a 39.0% decline year to date, but a 32.4% gain over the past year and weaker results over 3 and 5 years.
• These mixed returns have kept Alphatec on the radar as investors reassess how much they are willing to pay for exposure to its spinal surgery business. Recent coverage has focused on how the current share price and trading levels line up with expectations for the company in the medical devices space, which is feeding into shifting views on risk and opportunity.
• On Simply Wall St's valuation checks, Alphatec scores a 6 out of 6 for being undervalued across several metrics. Next, we will look at how different valuation approaches arrive at that view, and then finish with a broader framework that can help you assess whether the current price fits your own thesis.

Alphatec Holdings delivered 32.4% returns over the last year. See how this stacks up to the rest of the Medical Equipment industry.

Approach 1: Alphatec Holdings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes estimates of the cash a company could generate in the future and discounts those amounts back to today, aiming to express all those future dollars as a single present value per share.

For Alphatec Holdings, the latest twelve month free cash flow is a loss of $49.26 million. Analysts have provided explicit free cash flow estimates out to 2030, rising to a projected $179.10 million in that year, with further cash flows beyond that point extrapolated by Simply Wall St using a two stage Free Cash Flow to Equity approach.

Adding up those projected and extrapolated cash flows and discounting them back to today gives an estimated intrinsic value of US$25.23 per share. Compared with the recent share price of US$12.66, the DCF suggests the shares trade at a 49.8% discount, which indicates that Alphatec is materially undervalued on this model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Alphatec Holdings is undervalued by 49.8%. Track this in your watchlist or portfolio, or discover 50 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Alphatec Holdings.

Approach 2: Alphatec Holdings Price vs Sales

For companies where profits are limited or volatile, the P/S ratio is often a more useful cross check than earnings based metrics, because it compares what you pay per share to the revenue the business is already producing.

In general, higher expected growth and lower perceived risk can support a higher “normal” P/S multiple, while slower growth or higher risk usually call for a lower one. Alphatec Holdings currently trades on a P/S of 2.51x. That sits below the Medical Equipment industry average of 2.82x and also below the peer group average of 4.01x.

Simply Wall St’s Fair Ratio for Alphatec is 3.35x. This is a proprietary estimate of what a reasonable P/S might be, given factors such as the company’s growth profile, profit margins, industry, market cap and risk characteristics. Because it is tailored to Alphatec rather than being a simple comparison against broad industry or peer averages, it can give a more targeted view of value. With the current P/S of 2.51x below the Fair Ratio of 3.35x, the shares screen as undervalued on this measure.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Alphatec Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach your own story about Alphatec Holdings to the numbers by tying a view on future revenue, earnings and margins into a forecast, turning that into a Fair Value, and then comparing it with the current price. Each Narrative sits on the Community page as an accessible tool that updates automatically when new earnings or news arrive. This allows you to see, for example, how an optimistic view closer to a US$28.00 fair value and a cautious view nearer US$22.00 can both be valid, depending on how you judge the company’s spinal surgery opportunity and risks.

Do you think there's more to the story for Alphatec Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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