Simple Concepts Research Group

Is ADT (NYSE: ADT) A Good Buy At This Price?

by | Mar 23, 2022 | 52 Week Lows, Stock Picks

adt stock valuation

ADT, Inc. (ADT) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for ADT, Inc. (ADT) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.

ADT Fundamentals

ADT Stock Rating

Stock Price Target: $12.83

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for ADT, Inc. in comparison to the Business/Consumer Services industry and the S&P 500.

ADT, Inc. is a Small Cap company with a Market Cap of $7.05B.

How are investors using ADT earnings yield to assess the company?

ADT Inc. (ADT)_ Earnings Yield in Comparison to the Business_Consumer Services Industry, S&P 500 and 10 Year Treasury Rate

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for ADT is 12.63%, in comparison to 3.93% for the S&P 500 and -0.72% for the 10-year treasury bond. The median earnings yield for the Business & Consumer Services industry is 6.25%.

What does ADT Price-to-Earnings Ratio (P/E) tell investors about the company?

ADT Inc (ADT)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Business_Consumer Services Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

ADT does not currently have a reported P/E . The P/E for the Business & Consumer Services industry is 56.93 and the P/E for the S&P 500 is 25.45.

What is the current Price-to-Sales Ratio (P/S) for ADT?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

ADT is currently trading at a P/S of 1.17. The P/S for the Business & Consumer Services industry is 2.28 and the P/S for the S&P 500 is 2.95.

How does ADT Price-to-BookRatio (P/B) compare to the Business & Consumer Services industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

ADT P/B ratio is 2.10. The P/B for the Business & Consumer Services industry is 4.86 and the P/B for the S&P 500 is 4.54.

How attractive is ADT Return on Invested Capital (ROIC) to investors?

ADT Inc. (ADT)_ Return on Invested Capital in Comparison to the Business_Consumer Services Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

ADT ROIC is currently -2.67% in comparison to 9.29% for the Business & Consumer Services industry and 9.10% for the S&P 500.

ADT Inc. (ADT)_ Price Target & 52-Week Price Range

How has ADT stock performed over the past year? What is the current analyst price target?

Over the past 52 weeks, ADT has traded between the range of $6.68 and $11.77.

The current Analyst Price Target for ADT is $12.83.

What is ADT YOY Performance in comparison to its industry and the total market?

The YOY performance for ADT is -5.26%. The Business & Consumer Services industry has a YOY performance of 23.70% in comparison to the YOY S&P 500 performance of 14.01%.

ADT Inc. (ADT)_ YOY Performance in Comparison to the Business_Consumer Services Industry and the S&P 500

Recent Financial Results

  • Total revenue of $1.4 billion , up 5%
  • End of period recurring monthly revenue (“RMR”) of $359M, up 5%
  • YOY net subscriber growth; Total subscribers of 6.6M
  • Customer retention with gross customer revenue attrition at 13.1% and revenue payback of 2.3 years
  • GAAP net loss of $58M, or $(0.07) per share and adjusted net loss of $25M, or adjusted diluted net loss $(0.03) per share
  • Adjusted EBITDA of $574M

Stock Price Target: $12.83

Company Overview

ADT Stock Rating

ADT Inc. provides security, automation, and smart home solutions to consumer and business customers in the United States. It provides a range of fire detection, fire suppression, video surveillance, and access control systems to residential, commercial, and multi-site customers.

The company offers its products under the ADT, ADT Pulse, Protection 1, ADT Commercial, and Blue by ADT names. ADT was formerly known as Prime Security Services Parent, Inc. and changed its name to ADT Inc. in September 2017. ADT Inc. was founded in 1874 and is headquartered in Boca Raton, Florida. The current CEO is Jim DeVries.

Be sure to add ADT, Inc. (ADT) to your Watch List and if you haven’t done so already, check in on the performance of our Current Portfolio. Keep it simple and always do your due diligence.

This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.