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Alarm.com Holdings, Inc.'s (NASDAQ:ALRM) most recent earnings announcement in December 2018 signalled that the company experienced a significant headwind with earnings deteriorating by -26%. Below is my commentary, albeit very simple and high-level, on how market analysts predict Alarm.com Holdings's earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts' outlook for the coming year seems positive, with earnings expanding by a significant 60%. This strong growth in earnings is expected to continue, bringing the bottom line up to US$60m by 2022.
Although it’s informative understanding the growth year by year relative to today’s value, it may be more insightful estimating the rate at which the business is moving on average every year. The pro of this method is that it ignores near term flucuations and accounts for the overarching direction of Alarm.com Holdings's earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I put a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 30%. This means that, we can presume Alarm.com Holdings will grow its earnings by 30% every year for the next couple of years.
For Alarm.com Holdings, I've put together three fundamental factors you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is ALRM worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ALRM is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ALRM? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.