What Does Alarm.com’s Falling Multiple Really Say?
Alarm.com Holdings (ALRM) appears to fit a common investing rule: a lower price-to-earnings multiple, representing what investors pay for each dollar of profit, indicates a cheaper stock. Three years ago, the shares traded at 45.8 times profit, and today they trade at 24.0 times. So is Alarm.com stock cheaper than it was?
Alarm.com Stock Slipped While Its Multiple Fell
Alarm.com’s share price fell 6.0% over those three years, before dividends. The price drifted slightly lower while the multiple dropped by nearly half. Factors other than the share price accounted for most of that multiple contraction.
How Much Has Alarm.com’s Profit Grown?
Alarm.com recorded $118 million in profit over the latest twelve months, compared with $66.6 million three years earlier. That represents about 1.8 times as much profit. Profit and the multiple moved year by year as follows:
| Twelve months to | Net income | Change in a year | Price-to-earnings |
|---|---|---|---|
| Jun 30, 2021 | $81.6 million | +44.4% | 47.7 |
| Jun 30, 2022 | $42.6 million | -47.8% | 76 |
| Jun 30, 2023 | $66.6 million | +56.4% | 45.8 |
| Jun 30, 2024 | $108 million | +62% | 25.2 |
| Jun 30, 2025 | $130 million | +20% | 20.4 |
| Jun 30, 2026 | $118 million | -9% | 22.8 |
| Jun 30, 2026 (at the share price of Oct 19, 2026) | $118 million | -9% | 24 |
Net income is the reported total for the twelve months ending on the date shown. Change in a year is net income against the twelve months before. Each price-to-earnings multiple is the market value at the end of the September after those twelve months, over that net income. For example, the Jun 30, 2022 row uses the share price of Sep 30, 2022. The last row uses the share price of Oct 19, 2026.
Sales increased about 24% over the same three years, lagging the growth in profit. A wider margin made up the difference. Alarm.com kept 11.1% of its sales as profit in the latest twelve months, up from 7.8% three years earlier.
Alarm.com sells software subscriptions, which the company reports as SaaS and license revenue, and hardware. It distributes these offerings mostly through service providers. On the fiscal Q2 2026 call, management highlighted enterprise customers expanding their video surveillance deployments and cited growth at EnergyHub, its business serving utility customers.
Does A Lower Multiple Make Alarm.com Cheaper?
Not in the way the rule suggests. The better question is why the multiple was high, and what has happened to profit since. Alarm.com’s multiple peaked over the past five years at 76.0 at the end of September 2022. That peak came just after profit fell 47.8% in a year, to $42.6 million, so a smaller profit, not a higher share price, drove it. Profit has since grown to about 2.8 times that level.
A buyer today pays less for each dollar of profit than a buyer did three years ago, and profit has grown about 1.8 times since then. The share price still slipped, making a lower price a small part of the lower multiple. Most of it is profit catching up.
Is Alarm.com’s Profit Still Growing?
Alarm.com’s profit has turned down. After rising 20.0% the year before, profit fell 9.0% in the latest twelve months. Sales continued to expand, growing by 8.7%. On the fiscal Q2 2026 call, management cited lower interest income on cash, following the retirement of convertible notes in January, as a key driver of the profit decline in that quarter.
Today’s multiple sits just above the 22.9 of the S&P 500. Future profit growth, weighed against the fall over the latest year, is the figure to watch, starting with the report expected on or around November 4, 2026.
Does This Mean You Should Act On ALRM?
Our purpose is to inform you with unique data so you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose.
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