ADT Inc. (ADT): what the price requires
The current priced-in claim for ADT Inc. (ADT) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/ADT
Headline
| Field | Value |
|---|---|
| Ticker | ADT |
| Company | ADT Inc. |
| Current price | $6.79/sh |
| Composition | Monitoring and related services 85% / Security installation, product, and other 15% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 14.5% |
| Operating margin today | 25.4% |
| Margin compression implied | -10.9pp |
| Multiple paid | 10x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage (computed at the 7% minimum rate; the CAPM rate 6.2% sits below it).
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.36σ |
| cohort percentile (of 225 peers) | 6 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 0.66x | 4 | justifies |
| Earnings | 0.43x | 3 | justifies |
| Relative | 0.39x | 3 | justifies |
| Growth | 0.91x | 4 | justifies |
Families that justify the price: Asset, Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 5.8%); the inversion above states its own rate.
Per-Model Detail (n=14)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $88.37 | 0.08x | yes | FCF base $1.9B, growth 3% (input: historical growth), terminal g 3.3%, WACC 5.8%, 5yr projection |
| DCF Exit Multiple | Growth | $15.58 | 0.44x | yes | Exit EV/EBITDA: 4.0x / 4.9x / 6.9x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $17.20 | 0.39x | yes | P/S fallback (negative EPS): Sector P/S 2.5x × TTM revenue — excluded from consensus |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | $4.63 | 1.47x | yes | Stage 1: 5% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $9.03 | 0.75x | yes | BV/sh $5.09, ROE (TTM) 16.4%, ke 9.3% |
| Two-Stage Excess Return | Asset | $11.88 | 0.57x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $4.90 | 1.38x | yes | Rev $5.1B, growth 3% (input: historical growth; tapered), Terminal P/S: 0.8x / 1.0x / 1.1x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $0.00 | — | no | Negative/zero EPS — earnings-based value floored at $0 |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $5.23 | 1.30x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.94B × (1−26%) / WACC 5.8% → EPV (no growth) |
| Residual Income | Asset | $12.02 | 0.56x | yes | BV $5.09 + 5yr PV of (ROE (TTM) 16.4% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | — | — | no | — |
| EV/EBITDA Relative | Relative | $32.38 | 0.21x | yes | EBITDA $2.69B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $16.35 | 0.41x | yes | FCF $1876.4M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $15.66 | 0.43x | yes | SBC-adj FCF $1.83B (FCF $1.88B − SBC $0.05B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | — | — | no | — |
| ROIC-Justified P/B | Asset | $1.78 | 3.81x | yes | BV $5.09 × (ROIC 2.0% / WACC 5.8%) |
| P/Sales Sector | Relative | $17.20 | 0.39x | yes | Revenue $5.14B × sector P/S 2.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | — | — | no | — |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $7.7b |
| Net debt / NOPAT (after-tax) | 7.95x |
| Net debt / operating income (pre-tax) | 5.92x |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
At $6.58 the market pays roughly 10x company-wide operating income for ADT, a multiple that sits below what even a 5% annual decline in operating profit would justify. The price is supported by asset value, earnings power, and relative multiples all at once, so this is a value read, not a growth bet.
The business runs on contracted recurring monthly revenue (RMR was $359M in Q1 2026, flat year over year), and gross revenue attrition held at 13.1% with a 2.3-year revenue payback. The cash engine is the story: ADT guides adjusted free cash flow up roughly 20% in 2026 even as revenue and EPS run about flat.
The overhang is the balance sheet. Net debt sits near $7.7B against trailing operating income of about $1.3B, so net debt to operating income is close to 5.9x. The thesis is less about growth and more about whether free cash flow keeps deleveraging and funding buybacks at this price.
Bull Case
Start with what management is doing with the cash, because that is where ADT's case lives. The company has shifted from a subscriber-acquisition spend story to a cash-return story: a three-year $1.5B share repurchase authorization, a maintained quarterly dividend of $0.055, and a 2026 plan that prioritizes shareholder returns and disciplined subscriber spend. Adjusted free cash flow is guided to grow about 20% in 2026 even with revenue and EPS roughly flat, and the prior $600M buyback through 2025 already shrank the float against years of historical dilution. When a business buys back stock at a price that the valuation X-ray reads as below asset value, below earnings power, and below sector multiples, the per-share math compounds in the owner's favor without needing the top line to do anything heroic.
The second leg is the durability of the revenue base. ADT's revenue comes overwhelmingly from contracted monitoring: in its own filing the company explains that RMR "measures the volume of revenue under contract at a given point in time, which is a useful measure for forecasting future revenue performance as the majority of our revenue comes from recurring sources" (FY2025 10-K, accession 0001703056-26-000022). Monitoring and related services make up about 85% of the composition, with installation and product the remaining 15%. RMR held at $359M in Q1 2026 as higher average pricing offset a multifamily divestiture, gross revenue attrition stayed at 13.1%, and the revenue payback period was 2.3 years. A subscription book with low single-digit-month churn and a sub-2.5-year payback is the kind of annuity that supports debt service and still throws off cash.
The third leg is the strategic optionality the market is not paying for. ADT carries a deep relationship with Google, which sells and services Nest hardware through ADT, and State Farm holds roughly a 15% stake tied to a partnership that combines security, smart-home, and insurance risk-mitigation. Those are distribution and product channels that a standalone alarm company cannot easily replicate. Management's longer-range frame targets a 5% revenue CAGR, 10% EPS CAGR, and adjusted free cash flow CAGR above 10% through 2030, with a goal of adding a million net subscribers and pulling attrition down to 11%. The valuation work agrees the price is the conservative read: the excess-return and residual-income models land around $9 to $12 against the $6.58 price (June 27, 2026), and the earnings-power value sits near $7.57, so even a model that assumes no growth at all lands above today.
Bear Case
The bear case starts with the cycle and the customer, not the multiple. ADT sells into the residential and small-commercial security market, where demand tracks home formation, move activity, and the consumer's appetite to take on a monitoring contract. Gross revenue attrition of 13.1% is not a rounding error: it means the company has to replace roughly an eighth of its revenue base every year just to stand still, and management itself flagged pressure from non-pay cancellations in Q1 2026. In a softer consumer environment, non-pay churn rises first, and the 2.3-year payback period stretches when the cost to acquire a replacement subscriber climbs. The 2030 target of pulling attrition to 11% is a goal, not a trend, and the recent prints show it flat.
The deeper problem is the balance sheet carrying that cyclical revenue. Net debt is about $7.7B against trailing operating income near $1.3B, putting net debt to operating income close to 5.9x and net debt to after-tax operating profit near 7.9x. The company's own filing does not separately report interest expense in a way that lets a clean coverage ratio be computed, which removes a check a creditor would want. With only about $119M of liquid assets on hand, ADT depends on continuous free cash flow to service and refinance that stack. A flat-revenue, flat-EPS year is fine when rates are stable; it is far less fine if refinancing costs rise or if the cash-flow guide slips, because the equity is the thin slice on top of a large debt tower.
There is also a quality flag inside the returns. The valuation X-ray shows a ROIC-justified book value of only about $1.79 per share, derived from a ROIC near 2% against a WACC near 6%, which is the model's way of saying the invested-capital base is not earning its cost of capital on a reported basis. The reported earnings power leans on heavy depreciation and amortization of acquired subscriber accounts, so headline operating income and the cash that actually deleverages the business can diverge. If the cash-conversion story falters even modestly, the case for paying down debt and buying back stock at the same time weakens, and the market's low multiple stops looking like an opportunity and starts looking like a verdict on a levered annuity with structural churn.
Valuation
The valuation picture is unusually one-sided to the downside of price. Across the model families, the asset-based methods (simple and two-stage excess return, residual income) cluster between roughly $9 and $12 a share, the earnings-power value lands near $7.57, and the relative methods (sector P/S and EV/EBITDA) run higher still at $17 to $32. Only two methods sit below the $6.58 price: a two-stage dividend model at $4.63 and a discounted future market-cap model at $4.76, both of which lean on a thin payout and a tapered growth assumption rather than the cash the business actually produces. The FCF-yield method, capitalizing about $1.88B of free cash flow at the cost of equity with no growth, lands near $16.35.
That spread is why the inversion characterizes ADT as a value or asset-supported name rather than a growth bet. Inverting the price into the assumption it embeds, the market is paying about 10x company-wide operating income, a multiple low enough that the price sits below what even a 5% annual decline in operating profit would warrant. The implied operating margin baked into the price, around 14.8%, is well under the 25.6% trailing margin, so the price is underwriting material margin erosion, not expansion. The honest caveat is that the comparison set is thin, so this label should be read directionally.
The load-bearing input is therefore cash flow, not the income statement. The whole case rests on free cash flow that the company guides up about 20% in 2026, deployed into debt reduction and buybacks. If it slips, the 5.9x net-debt-to-operating-income leverage turns the same gap into a warning rather than a discount.
Catalysts
ADT's Q1 2026 results, reported on April 30, 2026, beat expectations and lifted the stock: total revenue rose about 1% to $1.3B, GAAP income from continuing operations climbed roughly 19% to $169M ($0.20 per diluted share), and the cash-flow metrics improved sharply. Management reaffirmed full-year 2026 guidance of roughly flat revenue and adjusted EPS with adjusted free cash flow growth of about 20%, and the next quarterly print is the key near-term checkpoint on whether the cash guide is tracking.
Capital return is the live catalyst. Alongside the three-year $1.5B repurchase authorization, the company maintained its $0.055 quarterly dividend, and continued buybacks at the current price directly drive per-share metrics. Watch the pace of repurchase and any change to the dividend as the clearest signal of management's confidence in the free-cash-flow trajectory.
The strategic partnerships remain the longer-dated optionality. The Google relationship (ADT sells and services Nest hardware) and the State Farm partnership and roughly 15% stake tie ADT into smart-home and insurance distribution; any concrete product or attach-rate progress from those channels would be the catalyst that moves the story from a deleveraging cash machine toward the 2030 growth targets of 5% revenue and 10% EPS CAGR. Analyst sentiment is constructive but measured: the consensus skews to Buy with an average price target near $9, implying roughly 19% upside from current levels.
Peer Cohorts (Per Segment, With Filing Citations)
ADT (whole company) (reported)
- ARLO (ARLO TECHNOLOGIES, INC.)
- FY2025 10-K: …is shipped and transfer of control from us to the customer occurs. Our revenue consists of gross revenue, less customer rebates and other channel sales incentives, allowances for estimated sales returns, price protection, and net changes in deferred revenue. A significant portion of our marketing 63 Table of Contents…
- FY2025 10-K: …services to, and through whom we reach different geographies or markets. Verisure is the exclusive distributor of our products in Europe for all retail channels and direct channels in connection with Verisure's security business. On April 25, 2024, Verisure notified us that it was exercising its right under the…
- ALLE (Allegion plc)
- FY2025 10-K: …the Allegion International business segment primarily in Australia, France, Germany, Italy, the Netherlands, New Zealand, Poland, Spain and the United Kingdom. Our active properties represent approximately 7.7 million square feet, of which approximately 45% is leased. We own 16 of our 37 production and assembly…
- FY2025 10-K: 100% of Gatewise Inc. ("Gatewise"), a provider of smart access control solutions in the U.S. multifamily marketplace based in the United States. Gatewise is reported in the Company's Allegion Americas segment. Waitwhile On July 7, 2025, the Company, through its subsidiaries, acquired 100% of Waitwhile Inc.…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.