Alarm.com Holdings, Inc. (ALRM) DCF Valuation & Fundamental Primer
Alarm.com Holdings, Inc. (ALRM) currently trades at $51.47 with an enterprise value of $3.06B. Our proprietary institutional model rates Alarm.com Holdings, Inc. at 87/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 3.7% vs. historical growth of 5.6% (Fairly Priced to Fundamentals).
Institutional fundamental teardown of Alarm.com Holdings, Inc. (ALRM) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Alarm.com Holdings, Inc. (ALRM) 3-Scenario DCF Valuation Range
Stress-test ALRM's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $51.47).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $61.34 +19% | $64.87 +26% | $68.98 +34% | $73.85 +43% | $79.68 +55% |
| 9.3% | $55.57 +8% | $58.35 +13% | $61.54 +20% | $65.24 +27% | $69.58 +35% |
| 10.0% | $50.81 -1% | $53.05 +3% | $55.58 +8% | $58.47 +14% | $61.81 +20% |
| 10.8% | $46.83 -9% | $48.66 -5% | $50.71 -1% | $53.02 +3% | $55.65 +8% |
| 11.5% | $43.45 -16% | $44.97 -13% | $46.65 -9% | $48.53 -6% | $50.65 -2% |
Institutional Software Quality Scorecard (87/100 · Grade A)
Strong fundamentals, above-average cash generation, and robust competitive positioning.
Elite deferred revenue float; FCF exceeds operating income by >20%
Minimal dilution friction; management compensation aligned with shareholders
Solid gross margins with potential for operating leverage at scale
Positive net cash cushion; self-funding operations with zero insolvency risk
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 181% of EBIT driven by upfront annual collections
- Low dilution friction: SBC is only 4.4% of revenue
- Net cash positive: $164.0M balance sheet buffer
Key Operational & Dilution Risks
Reverse-DCF Solver: What Growth is Priced Into ALRM?
Market implies 3.7% annual revenue growth over next 5 years (9.8% dilution-adjusted), in line with company run-rate.
Headline Reverse-DCF ignores Stock-Based Compensation (4.4% of revenue) and annual share dilution (2.7%/yr). Accounting for both requires 9.8% 5-year revenue CAGR to justify $51.47/sh on a true per-share economic cash flow basis.
Alarm.com Holdings, Inc. (ALRM) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $939.8M | $939.8M | $992.6M | $1.05B | $1.11B | $1.17B | $1.23B |
| Gross Profit | $613.7M | $613.7M | $648.1M | $684.5M | $722.9M | $763.5M | $806.3M |
| Operating Income (EBIT) | $108.5M | $108.6M | $114.6M | $121.1M | $127.9M | $135.0M | $142.6M |
| Stock-Based Compensation (SBC) | $41.2M | $41.3M | $43.6M | $46.0M | $48.6M | $51.3M | $54.2M |
| Unlevered Free Cash Flow (FCF) | $196.3M | $196.2M | $207.2M | $218.9M | $231.1M | $244.1M | $257.8M |
| SBC-Adjusted True Cash Flow | $155.0M | $155.0M | $163.7M | $172.9M | $182.6M | $192.8M | $203.6M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -12.8 + 0.49 × (Rule of 40) · R² = 72%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Alarm.com Holdings, Inc. | ALRM | $2.98B | $939.8M | 65.3% | 20.9% | 26.5% | 4.4% | 3.0× |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 3.0× | $2.82B | $2.98B | $51.47 | 0.0% |
| -20% Multiple Compression | 2.4× | $2.26B | $2.42B | $41.74 | -20.0% |
| -35% Multiple Compression | 2.0× | $1.83B | $2.00B | $34.45 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $4.70B | $4.86B | $83.86 | +66.6% |
Frequently Asked Questions: Alarm.com Holdings, Inc. (ALRM) Valuation
What is Alarm.com Holdings, Inc. (ALRM)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, Alarm.com Holdings, Inc. (ALRM) has a Base Case implied value of $55.55 per share (with a Bear Case of $33.16 and a Bull Case of $80.54), compared to its current price of $51.47. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Alarm.com Holdings, Inc. (ALRM)'s Rule of 40 score and Free Cash Flow margin?
Alarm.com Holdings, Inc. achieves a Rule of 40 score of 26.5%, combining a 5.6% revenue growth run-rate with a 20.9% TTM free cash flow margin on $939.8M in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into ALRM stock according to Reverse-DCF analysis?
At $51.47 per share (Enterprise Value of $2.82B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 3.7%, compared to Alarm.com Holdings, Inc.'s historical CAGR of 5.6%. Overall market expectations are rated as "Fairly Priced to Fundamentals".
How does Alarm.com Holdings, Inc. compare to Software & Cloud Services software peers?
Alarm.com Holdings, Inc. (ALRM) earns an institutional Software Quality Score of 87/100 (Grade A — High-Quality Compounder). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact Alarm.com Holdings, Inc. (ALRM)'s valuation?
Alarm.com Holdings, Inc. recorded $41.2M in TTM stock-based compensation (4.4% of revenue). When treating SBC as a cash-equivalent compensation expense, Alarm.com Holdings, Inc.'s SBC-adjusted free cash flow yield is 5.2%, scoring 25/25 on our Shareholder Dilution Friction pillar.