ALGN Dropped 24% In A Month. Have You Fully Evaluated The Risk?
Align Technology (ALGN) stock is down 24.4% in 21 trading days. History of recovery post-dips is not on your side and there is fundamental risk – specific to growth and downturn resilience. Consider the following data:
- Size: A $10 Bil company with $4.0 Bil in revenue currently trading at $145.74.
- Fundamentals: Last 12 month revenue growth of 0.6% and operating margin of 16.1%.
- Liquidity: Has Debt to Equity ratio of 0.0 and Cash to Assets ratio of 0.1
- Valuation: Currently trading at P/E multiple of 23.3 and P/EBIT multiple of 16.0
- Has returned (median) 9.5% within a year following sharp dips since 2010. See ALGN Dip Buy Analysis.
While we like to buy dips if the fundamentals check out – for ALGN, see Buy or Sell ALGN Stock – we are wary of falling knives. Specifically, it is worth trying to answer if things get really bad, and ALGN drops another 20-30% to $102.02 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience.
Below is a deep dive into Align Technology (ALGN) downturn resilience – specifically, its performance vs the market during past crises? Turns out, the stock has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
Below are the details, but before that, as a quick background: ALGN provides clear aligners and intraoral scanners, offering orthodontic treatments and imaging solutions for restorative and orthodontic dental procedures.
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2022 Inflation Shock
- ALGN stock fell 76.1% from a high of $729.92 on 8 September 2021 to $174.58 on 9 November 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $385.31 on 27 July 2023 , and currently trades at $145.74
| ALGN | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -76.1% | -25.4% |
| Time to Full Recovery | Not Fully Recovered days | 464 days |
2020 Covid Pandemic
- ALGN stock fell 53.8% from a high of $298.07 on 13 January 2020 to $137.72 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 14 July 2020
| ALGN | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -53.8% | -33.9% |
| Time to Full Recovery | 113 days | 148 days |
2018 Correction
- ALGN stock fell 55.9% from a high of $392.98 on 25 September 2018 to $173.16 on 9 September 2019 vs. a peak-to-trough decline of 19.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 22 October 2020
| ALGN | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -55.9% | -19.8% |
| Time to Full Recovery | 409 days | 120 days |
2008 Global Financial Crisis
- ALGN stock fell 82.6% from a high of $28.70 on 24 October 2007 to $5.00 on 23 October 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 2 April 2012
| ALGN | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -82.6% | -56.8% |
| Time to Full Recovery | 1257 days | 1480 days |
Worried that ALGN could fall much more? You could take a look at the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.