ALRM

Alarm.com is a durable, recurring-revenue software business dressed in modest headline numbers. FY2025 revenue reached $1.01B (+7.6%) but the more telling story is operating leverage: operating income jumped 23.1% to $134M while net income hit $132M (+7.4%) and EPS $2.46. Net income has nearly tripled over five years ($51.2M in FY2021 to $132M in FY2025) on steadily compounding revenue — exactly the consistent, profitable growth this business is built to deliver. The core Alarm.com segment (91% of revenue) is the engine: its SaaS and license revenue grew to $605M and segment operating income rose to $141.7M, with the high-margin SaaS line (total SaaS/license $689M vs hardware $322M) anchoring durability. ROE of 15.5% and net margin of 13.0% round out a genuinely high-quality profile.

The balance sheet is a fortress that the 18.8x P/E understates. With $961M cash against a $2.30B market cap, enterprise value is closer to ~$1.3B, putting EV against $134M operating income near ~10x — cheap for a profitable compounder. That cash is also working: interest income of $45.6M dwarfed interest expense of $17.3M, lifting pre-tax income to $166.6M well above operating income. Stockholders' equity grew 16.7% to $848M and retained earnings rose 34% to $523M, while management returned $41.6M via buybacks. Capex is trivial at $16.3M, so the model throws off ample free cash.