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Can Alphatech Turnaround Or Is It Doomed?


Alphatech is currently undervalued on an absolute and relative basis.

The company is almost at break-even point and costs will further be cut going forward.

However, there is a debt burden that will need to get refinanced in 2016.

If the debt gets refinanced, the company will have successfully bought itself more time to turnaround.

But, if the company can't refinance the loan, shareholders may be in trouble.

Investing in turnarounds that have not already transpired, can be risky to say the least. The rewards, if the turnaround is successful can sometimes outweigh the risks, depending on how you quantify the risks/rewards. Alphatech Holdings (NASDAQ:ATEC), is a perfect example of a high reward, high risk investment opportunity. There is a ton of debt on the balance sheet, that needs to get refinanced in the next 3-4 months, and the company is still unprofitable on an EPS basis. However, the company is very close to being at breakeven stage and if they get their loan refinanced, it will buy the company more time to continue its cost cutting and restructuring programs.


ATEC was founded in 1990 and since the founding, they have been working to deliver advancements in spinal fusion technology. Thus they are focused on improving the lives of customers via spinal fusion treatments. More importantly, the company is focused on designing, developing, manufacturing and marketing products for the surgical treatment of spinal disorders. In 2014, domestic and international revenues made up 66% and 34% of consolidated net sales, respectively.

The products ATEC sells are for the cervical, thoracolumbar and intervertebral regions of the spine. Not only do they address these key sections of the spine, but there are also products focused directly on spinal disorders and other spinal surgical procedures. What drives demand for ATEC's products is that surgeons across the globe are looking for better outcomes from their patients. Thus, if a product such as the Arsenal Spinal Fixation System, can improve a patient's life after surgery by 1%, surgeons across the globe will drive demand.

If we take a look at the Avalon Occipital Fixation System we can see that it provides surgeons the ability to more accurately place and secure bone graft. The former allows for superior fusion thus providing more stability after the surgery. If you are interested in reading about more of ATEC's products, I would suggest checking out this link here.

According to Chris Woolston, M.S., ~500,000 Americans undergo back surgery every year, just for lower back problems. Not only that but according to the Agency for Healthcare Research and Quality, America spends ~$11bn each year just to get rid of back pain. If you browse the web, you can see that there are tons of studies that show that individuals across the globe have issues with their back. For an example, it was found that 1/3 of people who are 50+ have an ongoing back or neck pain. Finally, there is a higher chance of an individual getting chronic back pain and thus undergoing surgery if they have a higher BMI. It's sad to say, but the obesity epidemic in America will continue driving demand for ATEC's products.

Overall, there will be an ever increasing demand for ATEC's products as long as spinal issues continue to be a problem in the global society (which in my opinion will continue going forward). Back pain will continue being an epidemic in America and internationally, unless an innovator/entrepreneur comes out with a genius idea, which will most likely be way down the road from now.

What Do I like and dislike about ATEC?

I like ATEC for its absolute and relative undervaluation, decent insider ownership and that the company is currently trading near its 52/week low. I also like how the company recently got a new CEO and it is very close to posting a profitable quarter. What I don't like is that the company has not experienced a profitable year in the past decade, there have been a huge amount of historical losses, and there is a ton of debt on the balance sheet that needs to get repaid or refinanced soon.


Market Cap

38.84 M

Enterprise Value

127.82 M

Shares Outstanding

99.26 M


10.50 M


191.90 M


79.94 M


25.46 M

Insider Ownership