Yahoo Finance Why Alarm.com Holdings, Inc. (NASDAQ:ALRM) Could Be Worth Watching
While Alarm.com Holdings, Inc. (NASDAQ:ALRM) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Alarm.com Holdings’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Alarm.com Holdings
Is Alarm.com Holdings Still Cheap?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Alarm.com Holdings’s ratio of 42.65x is trading slightly below its industry peers’ ratio of 43.17x, which means if you buy Alarm.com Holdings today, you’d be paying a decent price for it. And if you believe that Alarm.com Holdings should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like Alarm.com Holdings’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Alarm.com Holdings?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 7.6% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Alarm.com Holdings, at least in the short term.
What This Means For You
Are you a shareholder? It seems like the market has already priced in ALRM’s growth outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at ALRM? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on ALRM, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you'd like to know more about Alarm.com Holdings as a business, it's important to be aware of any risks it's facing. For example - Alarm.com Holdings has 1 warning sign we think you should be aware of.
If you are no longer interested in Alarm.com Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.
