At US$57.74, Is Alarm.com Holdings, Inc. (NASDAQ:ALRM) Worth Looking At Closely?

Alarm.com Holdings, Inc. (NASDAQ:ALRM), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. 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. But what if there is still an opportunity to buy? Let’s take a look at Alarm.com Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Alarm.com Holdings

Is Alarm.com Holdings Still Cheap?

According to my valuation model, Alarm.com Holdings seems to be fairly priced at around 6.3% below my intrinsic value, which means if you buy Alarm.com Holdings today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $61.65, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, Alarm.com Holdings’s share price may be more stable over time (relative to the market), as indicated by 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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Alarm.com Holdings, at least in the near future.

What This Means For You

Are you a shareholder? ALRM seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ALRM for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on ALRM should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Alarm.com Holdings at this point in time. For example, Alarm.com Holdings has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

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.