Alarm.com Holdings (ALRM): Assessing Valuation Potential After Recent Share Price Stabilization

Alarm.com Holdings (ALRM) has seen some movement in its stock price recently, prompting investors to take a closer look at the company’s performance and outlook. The stock is coming off a month in which it posted a 4% gain.

See our latest analysis for Alarm.com Holdings.

Alarm.com Holdings’ recent 1-month share price return of 4.45% has offered some relief after a challenging year, with momentum starting to stabilize despite a 1-year total shareholder return of -20.49%. While short-term traders may see glimmers of a comeback, the bigger picture points to a company that is still working to regain investor confidence.

With smart security and IoT platforms evolving fast, now might be a smart time to broaden your search and discover fast growing stocks with high insider ownership.

With shares still trading nearly 30% below analyst price targets and a track record of modest revenue and profit growth, the question remains: is Alarm.com an undervalued opportunity, or has the market already accounted for its potential gains?

Most Popular Narrative: 25% Undervalued

Compared to the most widely followed fair value of $68.71, Alarm.com’s last closing price of $51.41 points to a notable upside potential. This significant gap is underpinned by a detailed set of financial assumptions and catalyst expectations that shape the dominant narrative around Alarm.com’s future prospects.

The asset-light recurring software model, combined with a diversified revenue base (commercial, energy, international now ~30% of SaaS), is contributing to operating leverage and durable margin growth, evidenced by improving EBITDA and FCF generation. Strategic investments in its partner network and technology ecosystem (such as minority investments in residential and commercial channel partners and continued expansion of service provider relationships) are enhancing Alarm.com's competitive moat, reducing future customer acquisition costs, and supporting long-term revenue and earnings growth.

Read the complete narrative.

Want to know the secret sauce behind this valuation? The narrative is powered by bold assumptions about sustained margin expansion and aggressive profit growth. Uncover what underpins this projected fair value. See which metrics and financial bets make or break the case for Alarm.com.

Result: Fair Value of $68.71 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing tariff-related costs and slower new home sales may compress Alarm.com's future margins and dampen recurring revenue growth. This could challenge the bullish outlook.

Find out about the key risks to this Alarm.com Holdings narrative.

Build Your Own Alarm.com Holdings Narrative

If you see things differently or want to dig into the numbers yourself, you can craft your own view using the same data in just a few minutes with Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Alarm.com Holdings.

Looking for more investment ideas?

Your next winning opportunity could be just a click away. Don’t miss out on handpicked stock lists designed to fit your unique goals and interests.

• Unearth companies pushing the boundaries of innovation by starting with these 25 AI penny stocks, which offers a frontline view into artificial intelligence breakthroughs.
• Capture consistent income streams by checking out these 14 dividend stocks with yields > 3%, focusing on companies offering attractive yields above 3%.
• Capitalize on future tech waves with these 28 quantum computing stocks, spotlighting pioneers leading the transformation in quantum computing.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com