ALARM.COM HOLDINGS, INC. (ALRM): what the price requires
At today's price, ALARM.COM HOLDINGS, INC. (ALRM) is priced for +13.7% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/ALRM
Headline
| Field | Value |
|---|---|
| Ticker | ALRM |
| Company | ALARM.COM HOLDINGS, INC. |
| Current price | $52.03/sh |
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 | 3.3% |
| Operating margin today | 12.8% |
| Margin compression implied | -9.5pp |
| Implied growth | 13.7% |
| Multiple paid | 17x operating income |
The operating-margin requirement is derived from the framework's value band at year 11, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.8% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.4pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.45σ |
| cohort percentile (of 177 peers) | 24 |
| sustained it ~5 years at this level | 53% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
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 | 1.81x | 5 | expensive |
| Earnings | 2.16x | 5 | expensive |
| Relative | 0.72x | 5 | justifies |
| Growth | 0.89x | 3 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.6%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $86.67 | 0.60x | yes | FCF base $0.2B, growth 9% (input: historical growth), terminal g 4.0%, WACC 7.6%, 6yr projection |
| DCF Exit Multiple | Growth | $58.48 | 0.89x | yes | Exit EV/EBITDA: 16.4x / 18.4x / 20.4x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $78.83 | 0.66x | yes | P/E 35x (static sector reference · 2026-04), scenarios: 29.1x / 35.0x / 40.9x (bear / base = reference held flat / bull), EV/EBITDA 25x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $24.43 | 2.13x | yes | BV/sh $15.27, ROE (TTM) 14.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $30.56 | 1.70x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $39.94 | 1.30x | yes | Rev $1.0B, growth 9% (input: historical growth; tapered), Terminal P/S: 2.3x / 2.8x / 3.3x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $28.92 | 1.80x | yes | EPS $2.41, growth 2% (input: historical EPS growth), PEG=13.40 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $11.97 | 4.35x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.09B × (1−21%) / WACC 7.6% → EPV (no growth) |
| Residual Income | Asset | $31.39 | 1.66x | yes | BV $15.27 + 5yr PV of (ROE (TTM) 14.8% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $28.77 | 1.81x | yes | √(22.5 × EPS $2.41 × BVPS $15.27) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $71.90 | 0.72x | yes | EBITDA $0.17B × sector EV/EBITDA 25.0x |
| FCF Yield | Earnings | $29.50 | 1.76x | yes | FCF $168.8M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $23.40 | 2.22x | yes | SBC-adj FCF $0.14B (FCF $0.17B − SBC $0.03B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $24.11 | 2.16x | yes | EPS $2.41 × (8.5 + 2×1.7%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $4.89 | 10.64x | yes | BV $15.27 × (ROIC 2.4% / WACC 7.6%) |
| P/Sales Sector | Relative | $147.37 | 0.35x | yes | Revenue $1.04B × sector P/S 8.0x |
| PEG Fair Value | Relative | $12.05 | 4.32x | yes | EPS $2.41 × (PEG 1.5 × growth 1.7% (input: historical EPS growth)) → PE 2.6x |
| Earnings Yield | Earnings | $26.05 | 2.00x | yes | EPS $2.41 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $497.4m |
| Net debt / NOPAT (after-tax) | -4.83x (net cash) |
| Net debt / operating income (pre-tax) | -3.82x (net cash) |
| Interest coverage | 7.8x |
| Share count CAGR (dilution) | 0.5% |
| Burning cash | no |
Bullet Takeaways
- Alarm.com sells the software platform that runs connected-home security and automation, but it sells it through professional installers rather than direct to consumers, which is why it earns subscription economics on systems other companies install and service.
- The recurring revenue is unusually sticky: revenue retention reached 95.4% in the first quarter of 2026, among the highest readings in a decade, and that durability is the entire reason the stock can carry a premium to its asset value.
- The risk to watch is competitive and channel-based: large technology platforms and direct-to-consumer security brands are pushing into the smart home, and Alarm.com depends on its installer partners staying loyal, so partner retention and new-customer growth are the variables that move the story.
Bull Case
The most useful way into Alarm.com is to see where the price lands against each kind of valuation, because the methods split in an informative way. At $44.38 (June 27, 2026), the static lenses that value the company on its book and its trailing earnings power say the stock is expensive: an earnings-power read near $12 and a conservative Graham floor near $29 sit below the price. But the methods that credit the recurring-revenue growth say the opposite, and emphatically. A perpetual-growth cash-flow read lands near $92, a peer-multiple read on the software sector near $79, and an exit-multiple cash-flow read near $53, all above the current price. When the growth and peer-multiple families see a stock as cheap while the static methods see it as dear, the disagreement is about one thing: whether the recurring revenue is durable. Alarm.com's is.
The durability shows up directly in the retention data. The company earns its revenue "through our service provider partners, who resell our services and pay us monthly fees", and those subscriptions renew at a high rate: revenue retention reached 95.4% in the first quarter of 2026, which management flagged as one of the highest readings on that metric in ten years, with the trailing renewal rate at 95%. A security and automation platform embedded in a home does not get ripped out casually, because the system is installed, the sensors are placed, and the household is trained on it. That stickiness is what lets a roughly 13% operating margin and mid-teens return on equity compound, and it is what the static methods, which only see one year of earnings, structurally miss.
The financial position gives the model room to keep compounding. Alarm.com carries no debt and holds nearly $500 million in cash, so it funds its growth and the occasional bolt-on internally rather than through dilution, and the share count has been essentially flat. The platform also broadens the recurring base over time, layering energy management and video analytics onto the security core, which raises revenue per subscriber without proportionally raising acquisition cost. A debt-free, cash-rich, high-retention subscription business growing low double digits, where the forward-looking methods all see the price as a discount to the durable revenue stream, is the case the bull is making.
Bear Case
The competitive threat is the clearest hole in the thesis, and Alarm.com lists the people coming for its market by name. In its own 10-K it identifies rivals including "Abode Systems, Inc., Arlo Technologies, Inc., Cove Smart, LLC, Scout Security, Inc. and SimpliSafe, Inc." and notes that its partners also "compete with security solutions sold directly to subscribers, as well as managed service providers, such as cable television, telephone and broadband companies". Behind those named competitors sit the platforms the filing alludes to when it warns of rivals with "greater financial, technical, sales, marketing, distribution and other resources than we have". The direct-to-consumer brands undercut the professionally installed model on price, and the large technology platforms bundle smart-home features into hardware they already sell at scale. Alarm.com's defense is the professional-install channel, but that channel is exactly what the do-it-yourself and platform competitors are designed to bypass.
The channel itself is the second structural risk, because Alarm.com does not own its customer relationship. It reaches subscribers through service-provider partners, and the filing is blunt that if it "fail[s] to maintain our relationships with existing service provider partners or develop relationships with new service provider partners, our revenue and operating results would be adversely affected". Those partner contracts "typically have an initial term of one year". A platform whose revenue flows through intermediaries it must continually re-sign is more exposed than one with a direct subscriber base: a large partner defecting to a competitor, or building its own platform, takes its whole subscriber book with it. The high subscriber retention is real, but it sits on top of a partner layer that is thinner.
On valuation, the bear has a narrower but legitimate point. The price requires the recurring revenue to keep growing and the margins to hold, and while the bar is not extreme, the company is no longer the only credible smart-home platform. The static methods that value the demonstrated business land well below the price, near book-value-plus and earnings-power levels in the $12 to $30 range, which is the market saying the premium is entirely a bet on continued growth and retention. If competition compresses pricing or slows new-subscriber adds through the partner channel, the growth assumption that supports the premium weakens, and the stock drifts toward the static methods rather than the forward ones. The balance sheet removes any solvency worry, with no debt and ample cash, so the bear case is not about survival; it is about whether a sticky but intermediated subscription business can hold its growth against better-resourced competitors attacking the channel from both ends.
Valuation
The price is best understood through the disagreement among the methods, because the gap is the whole point. At $44.38, the static lenses, those that value Alarm.com on its assets and its trailing earnings power, place it below the price: an earnings-power value near $12, book-value-plus reads in the $24 to $31 range. The growth and peer-multiple lenses place it well above: a perpetual-growth cash-flow read near $92, a software-sector peer-multiple read near $79. The price sits between them, closer to the static side, which is the market crediting some but not all of the durable-growth premium that the forward methods see. The blend of all the methods lands almost exactly at the price, so the stock is fairly valued only if you weight the static and forward methods evenly, and the bull-bear debate is precisely about that weighting.
The inversion makes the embedded bet concrete and, for a holder, undemanding. To justify the price, Alarm.com does not need to expand its margin; the implied operating margin is well below the roughly 13% it earns today, paired with mid-single-digit growth. In plain terms, the price requires the company to keep growing modestly while giving back some margin, which is a soft requirement for a business retaining over 95% of its revenue. That is the signature of a durable subscription business priced reasonably rather than aggressively. The risk in the framing is not that the assumptions are heroic; it is that the durability itself is the bet, and the competitive pressure on the partner channel is the thing that could break the retention the whole case rests on.
Solvency is a non-issue and a quiet support under the price. Alarm.com holds nearly $500 million in cash against no debt, so the balance sheet is a floor rather than a risk, and interest coverage is irrelevant when there is no meaningful interest to cover. The share count has been essentially flat, so this is neither a dilution story nor a buyback story; it is a self-funding compounder. The decisive variable for the valuation is not the balance sheet or even the current margin. It is whether the recurring revenue keeps its stickiness as larger competitors attack the smart-home market, because that durability is the single assumption separating the static methods from the forward ones.
Catalysts
Alarm.com's first quarter of 2026 beat its own guidance and prompted a raise. SaaS and license revenue, the high-margin recurring core, reached $181.5 million, up 10.8% year over year and $5.6 million above the guidance midpoint, helped by a 95.4% revenue retention rate and the timing of EnergyHub revenue; total revenue was $265.2 million, up 11%. Adjusted EBITDA came in at $49.6 million. The retention reading was the standout, described as among the highest in ten years, which matters more for a subscription business than the headline growth rate.
Management raised the full-year outlook across the board. The company lifted its 2026 SaaS and license revenue guidance to $749.5 million to $750.5 million, raised total revenue guidance to $1.0595 billion to $1.0705 billion including hardware, and raised adjusted EBITDA guidance to $215 million to $216 million. The next earnings print is the read on whether the unusually high retention holds and whether new-subscriber growth through the partner channel keeps pace, which together determine whether the recurring revenue keeps compounding at the rate the raised guidance implies. For a platform this dependent on retention, the renewal rate is the number to watch over the headline revenue beat.
Peer Cohorts (Per Segment, With Filing Citations)
Alarm.com (reported)
- NSSC (NAPCO SECURITY TECHNOLOGIES, INC)
- (no filing in the citation store)
- ARLO (ARLO TECHNOLOGIES, INC.)
- (no filing in the citation store)
- ADT (ADT Inc.)
- (no filing in the citation store)
- IOT (SAMSARA INC.)
- (no filing in the citation store)
Other (reported)
- ADT (ADT Inc.)
- (no filing in the citation store)
- ARLO (ARLO TECHNOLOGIES, INC.)
- (no filing in the citation store)
- NSSC (NAPCO SECURITY TECHNOLOGIES, INC)
- (no filing in the citation store)
- EVCM (EverCommerce Inc.)
- (no filing in the citation store)
- BLKB (Blackbaud, Inc.)
- (no filing in the citation store)
- VERX (Vertex, Inc.)
- (no filing in the citation store)
- SSNC (SS&C TECHNOLOGIES HOLDINGS, INC.)
- (no filing in the citation store)
- MANH (MANHATTAN ASSOCIATES, INC.)
- (no filing in the citation store)
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.
Sources
Q1 FY2026 earnings release