Should You Investigate Alarm.com Holdings, Inc. (NASDAQ:ALRM) At US$79.90?
Alarm.com Holdings, Inc. (NASDAQ:ALRM), might not be a large cap stock, but 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$75.52. 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$79.90 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.
View our latest analysis for Alarm.com Holdings
What's the opportunity in Alarm.com Holdings?
According to my valuation model, Alarm.com Holdings seems to be fairly priced at around 13.05% 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 $70.68, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Alarm.com Holdings’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Alarm.com Holdings look like?
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. 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.
If you want to dive deeper into Alarm.com Holdings, you'd also look into what risks it is currently facing. For example, Alarm.com Holdings has 4 warning signs (and 1 which doesn't sit too well with us) 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.
