Is Now The Time To Look At Buying Alarm.com Holdings, Inc. (NASDAQ:ALRM)?

By
Simply Wall St
Published
November 20, 2021
NasdaqGS:ALRM
Source: Shutterstock

While Alarm.com Holdings, Inc. (NASDAQ:ALRM) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$89.52 and falling to the lows of US$76.73. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Alarm.com Holdings' current trading price of US$83.08 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the 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 there are any catalysts for a price change.

See our latest analysis for Alarm.com Holdings

What is Alarm.com Holdings worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 18.39% above my intrinsic value, which means if you buy Alarm.com Holdings today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $70.18, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Alarm.com Holdings’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Alarm.com Holdings?

earnings-and-revenue-growth
NasdaqGS:ALRM Earnings and Revenue Growth November 21st 2021

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. Though in the case of Alarm.com Holdings, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Currently, ALRM appears to be trading around its fair value, 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 beneficial 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 tabs on ALRM for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems 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 gel your views on ALRM should the price fluctuate below its true value.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 5 warning signs for Alarm.com Holdings you should be mindful of and 1 of these can't be ignored.

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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