A Fresh Look at Alight’s Valuation as Sword Health Partnership Expands AI Benefits Platform

Alight (NYSE:ALIT) just got more interesting for anyone watching the human capital management space. The company announced Sword Health, an AI-powered healthcare platform, is now part of the Alight Partner Network. By integrating Sword’s musculoskeletal and mental health solutions into its Worklife® platform, Alight can offer clients tailored care aimed at reducing healthcare costs and supporting employee well-being. This is a clear signal that Alight is leaning hard into AI-enabled, value-driven employee benefits.

This partnership comes as Alight pushes to diversify beyond its traditional payroll roots, focusing intently on employee benefits services and digital-first solutions. Shares jumped 3.8% following the news, but it’s worth noting this is a rare uptick in a year that’s seen the stock drift lower, down over 50% from a year ago. Management continues to chase growth through partnerships with companies like Microsoft and IBM, while amping up the role of AI in its offerings and working to improve key metrics like revenue retention.

The question now is whether this latest move opens up a true buying window, or if today’s price already reflects the growth Alight is counting on in its new direction.

Most Popular Narrative: 59% Undervalued

The leading narrative values Alight as deeply undervalued, with analysts projecting strong earnings growth and profitability improvements over the coming years.

Expanding partnerships, such as the new alliance with Goldman Sachs Asset Management, are expected to unlock new recurring revenue streams (e.g., wealth management products) and broaden Alight's addressable market, contributing to future revenue growth.

Curious how this bold target comes together? The linchpin is a series of aggressive growth assumptions and a future profit multiple typically reserved for top-tier companies. Wondering which game-changing forecasts make this possible? The narrative points to surprising leaps in recurring revenue and margin expansion, but you will have to dig in to see the specific financial bets made by consensus analysts.

Result: Fair Value of $8.21 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sales execution challenges and declining project revenues could delay growth. This could put pressure on Alight’s ability to meet analysts’ optimistic forecasts.

Find out about the key risks to this Alight narrative.

Another View: Discounted Cash Flow Perspective

A second approach is the SWS DCF model, which evaluates Alight based on projected future cash flows rather than earnings multiples. This model also points to Alight being undervalued. However, could its result depend on more optimistic assumptions?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Alight for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Alight Narrative

If you’re not convinced or wish to map out your own view, delving into the numbers yourself takes only a few minutes, so why not Do it your way?

A great starting point for your Alight research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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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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