A week ago, Alarm.com Holdings, Inc. (NASDAQ:ALRM) came out with a strong set of full-year numbers that could potentially lead to a re-rate of the stock. It was overall a positive result, with revenues beating expectations by 5.7% to hit US$502m. Alarm.com Holdings reported statutory earnings per share (EPS) US$1.06, which was a notable 11% above what analysts had forecast. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what analysts’ statutory forecasts suggest is in store for next year.
Taking into account the latest results, the latest consensus from Alarm.com Holdings’s nine analysts is for revenues of US$552.1m in 2020, which would reflect a meaningful 9.9% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to tumble 40% to US$0.66 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$543.8m and earnings per share (EPS) of US$0.70 in 2020. So it looks like there’s been a small decline in overall sentiment after the recent results – there’s been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$63.44, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. The most optimistic Alarm.com Holdings analyst has a price target of US$79.00 per share, while the most pessimistic values it at US$50.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Alarm.com Holdings’s past performance and to peers in the same market. It’s pretty clear that analysts expect Alarm.com Holdings’s revenue growth will slow down substantially, with revenues next year expected to grow 9.9%, compared to a historical growth rate of 22% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 12% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Alarm.com Holdings to grow slower than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Alarm.com Holdings. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Alarm.com Holdings’s revenues are expected to perform worse than the wider market. The consensus price target held steady at US$63.44, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. At Simply Wall St, we have a full range of analyst estimates for Alarm.com Holdings going out to 2021, and you can see them free on our platform here..
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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