ALC

We rate ALCON INC (ALC) as a Hold with a composite score of 62.1/100 at a current price of $79.97. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (88th percentile) and value (84th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (39th percentile) and investment (48th percentile) tempers our overall conviction. We assign a Narrow Moat rating (68/100), Low uncertainty, and Standard capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

ALCON INC holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 62.1/100 places it at rank #493 in our full 7,333-stock universe. With a $41.9B market capitalization, ALCON INC operates at meaningful scale within the Manufacturing sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 5%, though momentum at the 39th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 56% (+13.1pp vs sector) narrow to operating margins of 13% (+12.2pp vs sector) and net margins of 10.3%, yielding a gross-to-net conversion rate of 18%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $79.97, ALCON INC appears undervalued relative to its fundamentals. Our value factor score of 84/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 40.2x (a 81% premium to the sector median of 22.3x), EV/EBITDA of 4.2x (discounted to peers), P/B of 1.9x, P/S of 1.0x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Low uncertainty rating to ALCON INC. The company exhibits strong financial stability with a beta of 0.74, conservative leverage (24% D/E), and a stability factor in the 88th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: elevated valuation multiple (P/E 40.2x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 88th percentile and quality factor at the 74th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 56% provide a buffer against cost pressures; conservative leverage (24% D/E) limits balance sheet risk; above-average stability (88th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate ALCON INC's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 18.9%, and the balance sheet is managed within acceptable parameters (D/E: 24%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; ALCON INC falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 0.31% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, ALCON INC receives a Hold rating with a composite score of 62.1/100 (rank #493 of 7,333). Our quantitative framework assigns a Narrow Moat (68/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 67/100.

Our analysis supports a neutral stance on ALCON INC. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.