Alarm.com WACC - Weighted Average Cost of Capital
The WACC of Alarm.com Holdings Inc (ALRM) is 8.3%.
| Range | Selected | |
| Cost of equity | 8.6% - 11.0% | 9.8% |
| Tax rate | 8.4% - 12.1% | 10.25% |
| Cost of debt | 4.0% - 4.5% | 4.25% |
| WACC | 7.4% - 9.2% | 8.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.03 | 1.09 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.6% | 11.0% |
| Tax rate | 8.4% | 12.1% |
| Debt/Equity ratio | 0.33 | 0.33 |
| Cost of debt | 4.0% | 4.5% |
| After-tax WACC | 7.4% | 9.2% |
| Selected WACC | 8.3% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| ALRM | Alarm.com Holdings Inc | 0.33 | 1.05 | 0.81 |
| BLKB | Blackbaud Inc | 0.34 | 0.54 | 0.41 |
| BOX | Box Inc | 0.14 | 0.46 | 0.41 |
| CLDR | Cloudera Inc | 0.1 | 1.11 | 1.01 |
| EGHT | 8x8 Inc | 1.72 | 1.61 | 0.64 |
| KXS.TO | Kinaxis Inc | 0.01 | 0.81 | 0.8 |
| MDLA | Medallia Inc | 0.08 | 1.07 | 1 |
| NEWR | New Relic Inc | 0.08 | 0.93 | 0.87 |
| VERX | Vertex Inc | 0.06 | 1.07 | 1.02 |
| WK | Workiva Inc | 0.2 | 1.04 | 0.89 |
| Low | High | |
| Unlevered beta | 0.81 | 0.88 |
| Relevered beta | 1.04 | 1.13 |
| Adjusted relevered beta | 1.03 | 1.09 |
Alarm.com's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for Alarm.com:
cost_of_equity (9.80%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.03) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.