Alight (ALIT) Valuation in Focus After Earnings Beat and Goldman Sachs Partnership Announcement

Anyone watching Alight (NYSE:ALIT) lately knows the past few weeks have been anything but quiet. The stock grabbed attention following upbeat second-quarter results, as the company delivered higher recurring revenue and showed real discipline on expenses. Add in fresh buzz about a partnership with Goldman Sachs Asset Management to bolster its Worklife platform, and it is no surprise investors are debating whether this marks a turning point or just a pause before the next downward move.

Alight’s share price has struggled this year, dropping about 43% year to date and even hitting a 52-week low just last week. While management continues to buy back shares, which signals confidence, the market seems divided over whether recent moves are enough to offset concerns about longer deal cycles and competitive headwinds. Still, with steady operational performance and renewed optimism on earnings, some see this as a sign that momentum may be shifting, if only slightly, after months of negative sentiment.

So the big question is, with the stock trading near its lows, is Alight now trading at a discount or have investors already priced in any future growth?

Most Popular Narrative: 52.9% Undervalued

According to community narrative, Alight is trading significantly below its estimated fair value. Analysts point to improving profitability, recurring revenue growth, and new strategic partnerships as key tailwinds supporting this valuation outlook.

Adoption of AI-enabled automation and data analytics is improving operational efficiency and enhancing client experience. This is demonstrated by reduced call volumes and margin expansion, which should drive continued net margin improvement and higher profitability.

Curious how this turnaround story was valued so high? The real driver behind the bullish narrative is a bold outlook for Alight's profits and margins, with a valuation multiple that is rarely seen outside the hottest sectors. Wondering what kind of performance would justify such a leap in price? Uncover the specific projections and see if the underlying math adds up. Once you see the details, you will understand why this price target attracts so much attention.

Result: Fair Value of $8.21 (UNDERVALUED)

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

However, delayed project revenues and a slowdown in new client signings could disrupt Alight’s recovery if commercial momentum does not return soon.

Find out about the key risks to this Alight narrative.

Another View: Discounted Cash Flow Model

While the first approach relies on analyst earnings forecasts and market comparisons, our DCF model focuses on Alight's long-term cash flow potential instead. This method also suggests the stock may be undervalued. However, does this wider margin of safety hold up to closer scrutiny?

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 want to dig deeper or have your own take on what drives Alight’s value, you can build your own analysis in just a few minutes, then do it your way.

A great starting point for your Alight research is our analysis highlighting 3 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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