Alarm.com (NASDAQ:ALRM) shares are plummeting over the last three months, declining more than 25%. Its stock is currently trading around $36 a share, significantly lower from the 52-week high of $48 a share reached three months ago. The latest selloff in ALRM stock price was blamed on investor’s profits taking.
Source: finviz.com
The company’s stock not only appears undervalued trading at lower than industry valuations, its strong financial numbers and a solid outlook also signifies upside potential in the days to come.
At present, its stock is trading 55 times to earnings and 5.5 times to sales ratio, compared to the industry average of 146 and 6.6 times, respectively.
Moreover, its other key financial metrics have also been beating industry averages. In the last three years, its average revenue increased 26%, compared to the industry average of 11%. On the other hand, its earnings also increased 30% on average in the last three year, relative to the industry average of negative 7%.
Alarm.com has also been impressing investors through its innovative products and technologies. The company recently released new versions of its video service, web user interfaces, and EnergyHub Mercury software platform.
The strong growth in its financial numbers also suggests that its business strategies are working. In the latest quarter, its SaaS and license revenue soared almost 39% to $61.9 million, compared to the prior year period. ALRM’s total revenue increased 33% year-over-year to $90.0 million. Along with the growth in revenues, its net income surged substantially to $15 million, relative to the prior year earnings of $2.6 million.
We achieved solid results in the third quarter as our service provider partners continued to drive good growth in their subscriber base,” said Steve Trundle, President and CEO of Alarm.com.
The company expects similar growth in sales and earnings for the final quarter of 2017. They expect FY17 revenue in the range of $332.8M to $334M, compared to the consensus estimate of $328.41M. Overall, Alram.com appears in position to support the share price. Moreover, its lower valuations are also making it as an undervalued stock with a strong upside potential.
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