ALRM Stock Study (10-23-25)
Posted by Mark on January 13, 2025 at 06:59 | Last modified: October 23, 2025 11:43I recently did a stock study on Alarm.com Holdings, Inc. (ALRM, $51.04).
M* writes:
> Alarm.com Holdings Inc has a cloud-based platform that offers
> an expansive suite of IoT solutions addressing world-wide
> opportunities in the residential, multi-family, small business
> and enterprise commercial markets. It has two reportable
> segments: Alarm.com & Other. The Alarm.com segment
> represents the cloud-based Software platforms for intelligently
> connected property & related solutions. The other segment is
> focused on researching, developing & offering residential
> & commercial automation solutions & energy management
> products & services in adjacent markets. The… Alarm.com
> segment… allows home & business owners to secure their
> properties and automate & control an array of connected devices.
Since 2017, the small-size company has grown sales and earnings at annualized rates of 16.2% and 20.2% [earlier years excluded due to negative base resulting in mathematical distortion of growth rate (71.9%/year)]. Lines are mostly up, straight, and parallel except for EPS declines in ’18 and ’21. Five- (10-) year EPS R^2 is 0.34 (0.70) and Value Line (VL) gives an Earnings Predictability score of 50.
Since 2017, PTPM leads peer and industry averages while edging up from 9.5% to 15.1% (’24) with a last-5-year mean of 10.4%. ROE also leads peer and industry averages while trending up from 12.1% to 16.5% (’24) with a last-5-year mean of 12.5%. Unfortunately, Debt-to-Capital is higher than peer and industry averages over the last few years by increasing from 23.4% to 59.3% (’24) with a last-5-year mean of 43.6%.
Quick Ratio is 1.7 and Interest Coverage is 10.1 per M* who also assigns a “Narrow” [quantitative] Economic Moat and Financial Health grade of B (per BI website). VL gives a B+ grade for Financial Strength.
With regard to sales growth:
- YF projects YOY 5.7% and 4.3% for ’25 and ’26, respectively (based on 7 analysts).
- Zacks projects YOY 5.8% and 4.6% for ’25 and ’26, respectively (3 analysts).
- VL projects 4.1% annualized growth from ’24-’29.
- CFRA gives ACE of 5.7% YOY and 5.0% per year for ’25 and ’24-’26, respectively (7).
My 4.0% forecast is below the range.
With regard to EPS growth:
- MarketWatch projects annualized growth of 4.6% and 3.1% for ’24-’26 and ’24-’27 (based on 8 analysts).
- Nasdaq.com gives ACE of 4.8% YOY and 11.3% per year for ’26 and ’25-’27 [3, 3, and 1 analyst(s) for ’25, ’26, and ’27].
- Seeking Alpha projects 4-year annualized growth of 10.7%.
- Finviz gives ACE of 7.1% (3).
- YF projects YOY 3.8% and 6.6% for ’25 and ’26, respectively (8).
- Zacks projects YOY 4.0% and 8.0% for ’25 and ’26, respectively (4), along with 5-year annualized growth of 10.6%.
- VL projects 6.2% annualized growth from ’24-’29.
- CFRA gives ACE of 3.5% YOY and 4.9% per year for ’25 and ’24-’26, respectively (8).
My 6.0% forecast is below the long-term-estimate range (mean of four: 8.6%). Initial value is ’24 EPS of $2.29/share instead of 2025 Q2 EPS of $2.38 (annualized).
My Forecast High P/E is 33.0. Since 2017, high P/E falls from 83.9 to 33.8 (’24) with a last-5-year mean of 66.7 and a last-5-year-mean average P/E of 52.3. I am below the range.
My Forecast Low P/E is 17.0. Since 2017, low P/E falls from 45.5 to 22.6 (’24) with a last-5-year mean of 37.9. I am forecasting below the range.
My Low Stock Price Forecast (LSPF) of $38.90 is default based on initial value given above. This is 23.8% less than the previous close and 19.3% less than the 52-week low.
These inputs land ALRM in the BUY zone with a U/D ratio of 4.1. Total Annualized Return (TAR) is 14.6%.
PAR (using Forecast Average—not High—P/E) of 8.4% is less than I seek in a small-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.
To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only six studies done in the past 90 days (my study and two outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 4.2%, 4.7%, 34.4, and 24.3. [Although the sample size is too small for a valid comparison] I am lower on all but EPS growth. VL projects a future average annual P/E of 29.0, which is less than MS (29.4) and greater than me (25.0).
MS high / low EPS are $2.94 / $2.35 versus my $3.06 / $2.29 (per share). My high EPS is greater due that growth rate. VL is highest at $3.10.
MS LSPF of $42.10 implies a Forecast Low P/E of 17.9: less than the above-stated 24.3. MS LSPF is 15.4% less than the default $2.35/share * 24.3 = $57.11 (INVALID on today’s date), which results in more conservative zoning. MS LSPF is 8.2% greater than mine, however.
I believe MOS is strong in this study because my inputs are near or below respective analyst/historical ranges. Although my EPS growth rate is higher than MS, the tiny sample size precludes anything but anecdotal reference.
With regard to valuation, PEG is 2.0 and 3.4 per Zacks and my projected P/E, respectively: slightly overvalued (1.3 per M*). Relative Value [(current P/E) / 5-year-mean average P/E] is very cheap at 0.41.
Per U/D, ALRM is a BUY under $54/share. BI TAR criterion is met 101 / ((14.87 / 100 ) +1 ) ^ 5 ~ $50 given forecast high price ~$101 (no dividend).
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