Intrinsic value of Alarm.com Holdings, Inc. - ALRM

Previous Close

$53.65

  Intrinsic Value

$16.08

stock screener

  Rating & Target

str. sell

-70%

Previous close

$53.65

 
Intrinsic value

$16.08

 
Up/down potential

-70%

 
Rating

str. sell

We calculate the intrinsic value of ALRM stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  25.50
  23.45
  21.61
  19.94
  18.45
  17.11
  15.89
  14.81
  13.82
  12.94
  12.15
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.32
  6.19
  6.07
  5.97
Revenue, $m
  527
  651
  791
  949
  1,124
  1,317
  1,526
  1,752
  1,994
  2,252
  2,525
  2,814
  3,118
  3,436
  3,769
  4,117
  4,479
  4,856
  5,248
  5,656
  6,080
  6,520
  6,978
  7,453
  7,948
  8,462
  8,997
  9,554
  10,135
  10,739
Variable operating expenses, $m
  475
  585
  711
  853
  1,009
  1,182
  1,369
  1,571
  1,788
  2,019
  2,261
  2,520
  2,791
  3,077
  3,375
  3,686
  4,010
  4,348
  4,699
  5,064
  5,443
  5,838
  6,247
  6,673
  7,116
  7,576
  8,056
  8,554
  9,074
  9,615
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  475
  585
  711
  853
  1,009
  1,182
  1,369
  1,571
  1,788
  2,019
  2,261
  2,520
  2,791
  3,077
  3,375
  3,686
  4,010
  4,348
  4,699
  5,064
  5,443
  5,838
  6,247
  6,673
  7,116
  7,576
  8,056
  8,554
  9,074
  9,615
Operating income, $m
  52
  65
  80
  97
  115
  135
  157
  181
  206
  233
  264
  295
  326
  360
  394
  431
  469
  508
  549
  592
  636
  682
  730
  780
  832
  886
  942
  1,000
  1,061
  1,124
EBITDA, $m
  71
  87
  106
  127
  151
  177
  205
  235
  268
  302
  339
  378
  419
  461
  506
  553
  601
  652
  705
  760
  816
  876
  937
  1,001
  1,067
  1,136
  1,208
  1,283
  1,361
  1,442
Interest expense (income), $m
  0
  4
  6
  8
  11
  15
  18
  22
  27
  32
  37
  42
  48
  54
  60
  67
  74
  81
  89
  97
  105
  113
  122
  132
  141
  151
  162
  172
  184
  195
  207
Earnings before tax, $m
  49
  59
  72
  85
  100
  117
  134
  154
  174
  196
  222
  247
  272
  299
  328
  357
  388
  419
  453
  487
  523
  560
  599
  639
  681
  724
  769
  816
  866
  917
Tax expense, $m
  13
  16
  19
  23
  27
  31
  36
  42
  47
  53
  60
  67
  74
  81
  88
  96
  105
  113
  122
  132
  141
  151
  162
  173
  184
  196
  208
  220
  234
  247
Net income, $m
  36
  43
  52
  62
  73
  85
  98
  112
  127
  143
  162
  180
  199
  219
  239
  261
  283
  306
  330
  356
  382
  409
  437
  466
  497
  529
  562
  596
  632
  669

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  464
  573
  697
  836
  991
  1,160
  1,344
  1,543
  1,757
  1,984
  2,225
  2,479
  2,747
  3,027
  3,321
  3,627
  3,946
  4,278
  4,624
  4,983
  5,357
  5,744
  6,148
  6,567
  7,002
  7,456
  7,927
  8,418
  8,929
  9,462
Adjusted assets (=assets-cash), $m
  464
  573
  697
  836
  991
  1,160
  1,344
  1,543
  1,757
  1,984
  2,225
  2,479
  2,747
  3,027
  3,321
  3,627
  3,946
  4,278
  4,624
  4,983
  5,357
  5,744
  6,148
  6,567
  7,002
  7,456
  7,927
  8,418
  8,929
  9,462
Revenue / Adjusted assets
  1.136
  1.136
  1.135
  1.135
  1.134
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
  1.135
Average production assets, $m
  127
  156
  190
  228
  270
  316
  366
  420
  479
  540
  606
  675
  748
  825
  905
  988
  1,075
  1,165
  1,260
  1,357
  1,459
  1,565
  1,675
  1,789
  1,907
  2,031
  2,159
  2,293
  2,432
  2,577
Working capital, $m
  8
  10
  13
  15
  18
  21
  24
  28
  32
  36
  40
  45
  50
  55
  60
  66
  72
  78
  84
  90
  97
  104
  112
  119
  127
  135
  144
  153
  162
  172
Total debt, $m
  108
  156
  211
  272
  340
  415
  496
  584
  678
  779
  885
  997
  1,115
  1,239
  1,368
  1,503
  1,644
  1,790
  1,943
  2,101
  2,266
  2,437
  2,615
  2,800
  2,992
  3,192
  3,399
  3,616
  3,841
  4,076
Total liabilities, $m
  205
  253
  307
  369
  437
  512
  593
  681
  775
  875
  981
  1,093
  1,211
  1,335
  1,464
  1,600
  1,740
  1,887
  2,039
  2,198
  2,362
  2,533
  2,711
  2,896
  3,088
  3,288
  3,496
  3,712
  3,938
  4,173
Total equity, $m
  260
  320
  390
  467
  554
  648
  751
  863
  982
  1,109
  1,244
  1,386
  1,536
  1,692
  1,856
  2,027
  2,206
  2,392
  2,585
  2,786
  2,994
  3,211
  3,437
  3,671
  3,914
  4,168
  4,431
  4,706
  4,991
  5,289
Total liabilities and equity, $m
  465
  573
  697
  836
  991
  1,160
  1,344
  1,544
  1,757
  1,984
  2,225
  2,479
  2,747
  3,027
  3,320
  3,627
  3,946
  4,279
  4,624
  4,984
  5,356
  5,744
  6,148
  6,567
  7,002
  7,456
  7,927
  8,418
  8,929
  9,462
Debt-to-equity ratio
  0.420
  0.490
  0.540
  0.580
  0.610
  0.640
  0.660
  0.680
  0.690
  0.700
  0.710
  0.720
  0.730
  0.730
  0.740
  0.740
  0.750
  0.750
  0.750
  0.750
  0.760
  0.760
  0.760
  0.760
  0.760
  0.770
  0.770
  0.770
  0.770
  0.770
Adjusted equity ratio
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  36
  43
  52
  62
  73
  85
  98
  112
  127
  143
  162
  180
  199
  219
  239
  261
  283
  306
  330
  356
  382
  409
  437
  466
  497
  529
  562
  596
  632
  669
Depreciation, amort., depletion, $m
  18
  22
  26
  31
  36
  42
  48
  55
  62
  70
  75
  83
  92
  102
  112
  122
  133
  144
  156
  168
  180
  193
  207
  221
  235
  251
  267
  283
  300
  318
Funds from operations, $m
  54
  65
  78
  93
  109
  127
  146
  167
  189
  213
  237
  264
  291
  320
  351
  383
  416
  450
  486
  523
  562
  602
  644
  687
  732
  779
  828
  879
  932
  987
Change in working capital, $m
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
Cash from operations, $m
  52
  64
  76
  91
  106
  124
  143
  163
  185
  209
  233
  259
  286
  315
  346
  377
  410
  444
  480
  517
  555
  595
  636
  680
  724
  771
  820
  870
  923
  978
Maintenance CAPEX, $m
  -12
  -16
  -19
  -23
  -28
  -33
  -39
  -45
  -52
  -59
  -67
  -75
  -83
  -92
  -102
  -112
  -122
  -133
  -144
  -156
  -168
  -180
  -193
  -207
  -221
  -235
  -251
  -267
  -283
  -300
New CAPEX, $m
  -26
  -30
  -34
  -38
  -42
  -46
  -50
  -54
  -58
  -62
  -66
  -69
  -73
  -76
  -80
  -83
  -87
  -90
  -94
  -98
  -102
  -106
  -110
  -114
  -119
  -123
  -128
  -134
  -139
  -145
Cash from investing activities, $m
  -38
  -46
  -53
  -61
  -70
  -79
  -89
  -99
  -110
  -121
  -133
  -144
  -156
  -168
  -182
  -195
  -209
  -223
  -238
  -254
  -270
  -286
  -303
  -321
  -340
  -358
  -379
  -401
  -422
  -445
Free cash flow, $m
  14
  18
  23
  29
  36
  44
  54
  64
  75
  88
  100
  115
  130
  147
  164
  182
  201
  221
  242
  263
  286
  309
  333
  359
  385
  412
  440
  470
  500
  532
Issuance/(repayment) of debt, $m
  41
  48
  55
  61
  68
  75
  81
  88
  94
  100
  106
  112
  118
  124
  129
  135
  141
  147
  152
  158
  165
  171
  178
  185
  192
  200
  208
  216
  225
  235
Issuance/(repurchase) of shares, $m
  17
  17
  17
  16
  13
  10
  5
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  58
  65
  72
  77
  81
  85
  86
  88
  94
  100
  106
  112
  118
  124
  129
  135
  141
  147
  152
  158
  165
  171
  178
  185
  192
  200
  208
  216
  225
  235
Total cash flow (excl. dividends), $m
  73
  84
  95
  106
  117
  129
  140
  152
  169
  188
  207
  227
  248
  270
  293
  317
  342
  367
  394
  422
  450
  480
  511
  544
  577
  612
  648
  686
  726
  767
Retained Cash Flow (-), $m
  -53
  -61
  -69
  -78
  -86
  -95
  -103
  -111
  -119
  -127
  -135
  -142
  -150
  -157
  -164
  -171
  -178
  -186
  -193
  -201
  -209
  -217
  -225
  -234
  -244
  -253
  -264
  -274
  -286
  -298
Prev. year cash balance distribution, $m
  71
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  91
  23
  26
  28
  31
  34
  37
  40
  50
  61
  72
  85
  99
  113
  129
  146
  163
  182
  201
  221
  242
  263
  286
  309
  334
  359
  385
  412
  440
  469
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  87
  21
  22
  23
  24
  25
  25
  25
  29
  32
  34
  36
  37
  38
  38
  37
  36
  33
  31
  28
  25
  22
  19
  16
  13
  10
  8
  6
  5
  4
Current shareholders' claim on cash, %
  99.1
  98.4
  97.8
  97.4
  97.1
  97.0
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9

Alarm.com Holdings, Inc. is a platform solution for the connected property. The Company offers a suite of cloud-based solutions for the smart home and business, including interactive security, video monitoring, intelligent automation and energy management. The Company operates through two segments: Alarm.com and Other. The Alarm.com segment represents its cloud-based platform for the intelligently connected property solutions. The Other segment is focused on researching and developing home and commercial automation and energy management products and services for sale in adjacent markets. Its solutions are used in both smart homes and businesses. It is involved in designing and manufacturing various types of hardware that enable its solutions, including cellular communication modules, image sensor, video cameras and alarm.com smart thermostat. The Company offers a suite of high definition, Internet protocol (IP), video cameras to enable its video monitoring services.

FINANCIAL RATIOS  of  Alarm.com Holdings, Inc. (ALRM)

Valuation Ratios
P/E Ratio 247.5
Price to Sales 9.5
Price to Book 13
Price to Tangible Book
Price to Cash Flow 137.5
Price to Free Cash Flow 353.6
Growth Rates
Sales Growth Rate 24.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 40.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 3.7%
Total Debt to Equity 3.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 7.9%
Return On Total Capital 5.3%
Ret/ On T. Cap. - 3 Yr. Avg. 10.7%
Return On Equity 5.5%
Return On Equity - 3 Yr. Avg. 11.6%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 62.1%
Gross Margin - 3 Yr. Avg. 61.7%
EBITDA Margin 7.7%
EBITDA Margin - 3 Yr. Avg. 11%
Operating Margin 5.4%
Oper. Margin - 3 Yr. Avg. 8.9%
Pre-Tax Margin 5.4%
Pre-Tax Margin - 3 Yr. Avg. 8.5%
Net Profit Margin 3.8%
Net Profit Margin - 3 Yr. Avg. 6%
Effective Tax Rate 28.6%
Eff/ Tax Rate - 3 Yr. Avg. 29.3%
Payout Ratio 0%

ALRM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ALRM stock intrinsic value calculation we used $420 million for the last fiscal year's total revenue generated by Alarm.com Holdings, Inc.. The default revenue input number comes from 0001 income statement of Alarm.com Holdings, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ALRM stock valuation model: a) initial revenue growth rate of 25.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for ALRM is calculated based on our internal credit rating of Alarm.com Holdings, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Alarm.com Holdings, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ALRM stock the variable cost ratio is equal to 90.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ALRM stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Alarm.com Holdings, Inc..

Corporate tax rate of 27% is the nominal tax rate for Alarm.com Holdings, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ALRM stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ALRM are equal to 24%.

Life of production assets of 8.1 years is the average useful life of capital assets used in Alarm.com Holdings, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ALRM is equal to 1.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $277.589 million for Alarm.com Holdings, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 48.205 million for Alarm.com Holdings, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Alarm.com Holdings, Inc. at the current share price and the inputted number of shares is $2.6 billion.

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