Value
7.6/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.1 |
| P/S | 8.9 |
| EV/EBITDA | 3.5 |
| Fwd P/E | 8.2 |
| PEG | 9.2 |
| Analyst target | 7.5 |
- ▸Forward P/E: 14.5x
- ▸PEG: 0.63
- ▸Attractively valued
ALRM · Why this verdict
Why Alarm.com Holdings (ALRM) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.6/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Alarm.com has delivered a perfect four-quarter earnings beat streak, maintains a wide economic moat, and screens attractively on valuation at a forward multiple of 15.3x and PEG of 0.67; the principal limitation is a technical setup still in early recovery — the stock remains below its 200-day moving average — suggesting the risk/reward is favorable but patience on entry timing is warranted.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The company has beaten consensus EPS estimates in all four of the past four quarters with an average upside surprise of approximately 16%, and operates with a wide economic moat that supports durable pricing power and recurring revenue streams unlikely to be easily replicated. Bull case | The beat streak extends to six consecutive quarters and gross margins hold above current levels, demonstrating that the moat is defending profitability under competitive pressure. | →Stable |
| CounterFour consecutive beats can reflect a period of conservatively set consensus estimates rather than structural outperformance; if the analyst community recalibrates upward, future beats may narrow or reverse without any deterioration in underlying business performance. | ||
The stock trades at a forward earnings multiple of 15.3x with a PEG ratio of 0.67, placing it at a meaningful discount to its earnings growth rate and toward the inexpensive end of software-application valuations — an unusual setup for a business with a demonstrable moat. Valuation breakdown | The forward multiple re-rates toward 22x as the earnings beat streak continues and the technical overhang clears, closing the gap between the current discount and a valuation consistent with the moat quality. | →Stable |
| CounterThe discount may be warranted: a Rule of 40 score of 20 fails the standard software profitability benchmark, and the current multiple may already reflect the market's view that growth is moderating and margins are not expanding. | ||
Despite solid individual metrics, the combined revenue growth and operating margin falls to a Rule of 40 score of 20, well below the 40-point threshold that software investors commonly use to identify businesses achieving a healthy growth-profitability balance. Quality breakdown | The Rule of 40 score rises above 30 over the next four quarters as either revenue growth accelerates or operating margins expand, narrowing the gap to the industry benchmark. | →Stable |
| CounterRule of 40 is a heuristic, not a hard quality gate; a business with a wide moat, nine out of nine Piotroski financial health score, and a consistently expanding earnings base can merit a premium even while below the rule — the metric penalizes late-stage growers transitioning toward profitability. | ||
The stock is trading below its 200-day moving average with the trend declining at 3.3% over 30 days; while MACD has turned constructive and RSI has recovered to 62, the recovery has not yet produced a sustained reclaim of the long-term trend line — a condition that has historically preceded continued consolidation as often as it has preceded rallies. Momentum breakdown | Price reclaims and holds above the 200-day moving average for at least 15 consecutive sessions, converting the technical resistance into support. | →Stable |
| CounterMACD improvement and rising RSI alongside volume accumulation are exactly the early signals that precede successful recoveries; waiting for full technical confirmation often means missing 30–40% of the move off the technical low. | ||
The company has beaten consensus EPS estimates in all four of the past four quarters with an average upside surprise of approximately 16%, and operates with a wide economic moat that supports durable pricing power and recurring revenue streams unlikely to be easily replicated.
→StableBull case
- Expectation
- The beat streak extends to six consecutive quarters and gross margins hold above current levels, demonstrating that the moat is defending profitability under competitive pressure.
CounterFour consecutive beats can reflect a period of conservatively set consensus estimates rather than structural outperformance; if the analyst community recalibrates upward, future beats may narrow or reverse without any deterioration in underlying business performance.
The stock trades at a forward earnings multiple of 15.3x with a PEG ratio of 0.67, placing it at a meaningful discount to its earnings growth rate and toward the inexpensive end of software-application valuations — an unusual setup for a business with a demonstrable moat.
→StableValuation breakdown
- Expectation
- The forward multiple re-rates toward 22x as the earnings beat streak continues and the technical overhang clears, closing the gap between the current discount and a valuation consistent with the moat quality.
CounterThe discount may be warranted: a Rule of 40 score of 20 fails the standard software profitability benchmark, and the current multiple may already reflect the market's view that growth is moderating and margins are not expanding.
Despite solid individual metrics, the combined revenue growth and operating margin falls to a Rule of 40 score of 20, well below the 40-point threshold that software investors commonly use to identify businesses achieving a healthy growth-profitability balance.
→StableQuality breakdown
- Expectation
- The Rule of 40 score rises above 30 over the next four quarters as either revenue growth accelerates or operating margins expand, narrowing the gap to the industry benchmark.
CounterRule of 40 is a heuristic, not a hard quality gate; a business with a wide moat, nine out of nine Piotroski financial health score, and a consistently expanding earnings base can merit a premium even while below the rule — the metric penalizes late-stage growers transitioning toward profitability.
The stock is trading below its 200-day moving average with the trend declining at 3.3% over 30 days; while MACD has turned constructive and RSI has recovered to 62, the recovery has not yet produced a sustained reclaim of the long-term trend line — a condition that has historically preceded continued consolidation as often as it has preceded rallies.
→StableMomentum breakdown
- Expectation
- Price reclaims and holds above the 200-day moving average for at least 15 consecutive sessions, converting the technical resistance into support.
CounterMACD improvement and rising RSI alongside volume accumulation are exactly the early signals that precede successful recoveries; waiting for full technical confirmation often means missing 30–40% of the move off the technical low.
Per-dimension breakdown
Quality
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 4.9 |
| ROA | 3.1 |
| Gross margin | 9.2 |
| Op margin | 4.9 |
| Net margin | 6.2 |
| Current ratio | 7.8 |
| FCF quality | 5.3 |
| Moat | 7.6 |
| Rule of 40 | 3.0 |
| Piotroski F | 10.0 |
- ▸Earnings quality warning: 70% FCF/NI
- ▸Wide economic moat
- ▸Compounder quality: strong returns + growth
- ▸Rule of 40: 20 (fail)
Growth
5.9/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.2 |
| EPS growth | 6.6 |
Momentum
2.0/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.5 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 1.0 |
| Volume | 3.4 |
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope -3.6%/30d — confirmed downtrend
Sentiment
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 8.8 |
| erm sentiment | 5.0 |
- ▸Analyst upside: 33%
Insider
3.9/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 4.5 |
| insider conviction | 2.0 |
| holder change | 5.1 |
- ▸Modest insider selling — $1,393,420 (0.065% of mkt cap)
Peer rank
4.2/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 7.3 |
| quality rank | 6.1 |
| growth rank | 3.2 |
Technical
6.0/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 6.7 |
| support resistance | 6.6 |
| 52w position | 4.8 |
Risk (lower is worse)
6.0/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.1 |
| days to cover | 5.4 |
| volatility | 4.4 |
| put call | 6.7 |
| implied vol | 6.6 |
| max pain risk | 3.0 |
| beta | 8.3 |
| debt equity | 7.2 |
- ▸Above max pain $40
Catalyst
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
- ▸Perfect beat streak: 4Q
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- ASYMMETRY:2.4>=1.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:43d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:2.0<4.5
- DEATH_CROSS:HARD_BLOCK
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
2.37
Upside
+15.4%
Downside
6.5%
Sizing output
AVOID
SetupRANGE_BOUND — RSI 47 mid-range, Bollinger mid-band
EdgeNO_EDGE — No clear edge identified
SuitabilityAGGRESSIVE — MCap $2.1B<$5B
Investment implication
The F-path SELL output reflects an overall score of 5.6 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 7.6) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:2.0<4.5, DEATH_CROSS:HARD_BLOCK) reinforce the read. Current asymmetry R:R is 2.37 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 7.6, Catalyst at 7.5, and Quality at 6.2; the weakest are Momentum at 2.0, Insider at 3.9, and Peer rank at 4.2. The V9 engine flagged 2 failed gates with 1 warning, producing an asymmetric reward-to-risk of 2.37 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1The company has beaten consensus EPS estimates in all four of the past four quarters with an average upside surprise of approximately 16%, and operates with a wide economic moat that supports durable pricing power and recurring revenue streams unlikely to be easily replicated.
Trip ifEPS surprise falls below 0% in 2 of the next 4 reported quarters, breaking the beat streak.
- P2The stock trades at a forward earnings multiple of 15.3x with a PEG ratio of 0.67, placing it at a meaningful discount to its earnings growth rate and toward the inexpensive end of software-application valuations — an unusual setup for a business with a demonstrable moat.
Trip ifForward P/E expands above 25x or PEG ratio rises above 1.5, removing the valuation discount.
- P3The stock is trading below its 200-day moving average with the trend declining at 3.3% over 30 days; while MACD has turned constructive and RSI has recovered to 62, the recovery has not yet produced a sustained reclaim of the long-term trend line — a condition that has historically preceded continued consolidation as often as it has preceded rallies.
Trip ifPrice reclaims the 200-day moving average and holds above it for 20 or more consecutive sessions, confirming the technical recovery.
- P4Despite solid individual metrics, the combined revenue growth and operating margin falls to a Rule of 40 score of 20, well below the 40-point threshold that software investors commonly use to identify businesses achieving a healthy growth-profitability balance.
Trip ifRule of 40 score rises above 40 for 2 consecutive reporting periods, eliminating the profitability gap concern.