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Alarm: An Underappreciated Growth Story

Mar. 08, 2021 11:43 AM ETAlarm.com Holdings, Inc. (ALRM)1 Comment
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  • Alarm is an attractive growth stock that targets an ever-growing market for technological property management solutions.
  • The company is attractively valued at just 7x EV to Sales and is seeing expanding profitability margins.
  • Despite a fragmented automation market, Alarm has built a competitive edge through its cloud-based platform, allowing for data scalability.


Alarm (NASDAQ:ALRM) had a good year in 2020, as the pandemic forced people to stay at home, translating into increased demand for smart home solutions. As a result, shares are up by a staggering 120%, widely outperforming the broader market. While shares are have dropped roughly 20% from all-time highs in January, the dip may be an excellent opportunity to buy an undervalued technology player that continues to grow at impressive rates, despite facing looming competition in a market that is set to expand rapidly throughout the next few decades.

Source: Aspen Electronic Systems

The platform Alarm.com offers a wide range of cloud-based solutions for smart homes, and businesses, including interactive security, video monitoring, intelligent automation, and energy management. Despite slowly decelerating revenue growth since its IPO in 2015, the company is still seeing solid growth on the top and bottom line, quickly expanding its subscriber base. Thus, when accounting for future growth aspects and net profit margins, Alarm might continue to reward investors as the company still appears undervalued.

Growth Continues

Alarm reported robust Q4 earnings at the end of February, as Alarm beat both revenue and EPS figures. Revenue came in at $165 million, beating the consensus estimates by almost 14 percent and EPS of 0.45 vs. 0.27, representing a surprise factor of 68%. In its SaaS and license segment, revenue increased by 17% compared to a year earlier. At the same time, the company is mightily balancing growth and profitability, reporting adjusted net income of $16 million.

We are pleased to report solid results for the quarter and the year, our service provider partners and the Alarm team continued to perform at high levels despite the ongoing pandemic. During the year we delivered a breadth of innovative new platform capabilities for both our residential and commercial services, including the

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I am a 22 year old investor with a Bachelors degree in Finance and Business. My investing strategy is focused on finding the best opportunities from every sector: value or growth - there is value in everything. For all my investment decisions I undertake extensive research, collecting relevant data, charts and graphs for the given company. The three most crucial ratios for my analysis are margins, CAGR revenue growth and marketing spend as a % of revenue. These measures are all based on 2024 estimates in order to evaluate the given moat of a company/stock. Therefore, all my investments are long-term, with the exception of large fluctuations in the fundamentals of an investment or drastic valuation changes. I hope that I am able to share some of my investment opinions with you and look forward to learning more in the process! Best regards

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