Arm Holdings plc American Depositary Shares Fundamental Analysis (NASDAQ: ARM)
Arm Holdings plc American Depositary Shares Fundamental Analysis (NASDAQ: ARM)
Arm Holdings plc American Depositary Shares (NASDAQ: ARM) shows moderate financial fundamentals with a PE ratio of 245.95, profit margin of 20.25%, and ROE of 13.00%. The company generates $5.2B in annual revenue with strong year-over-year growth of 23.94%.
Key Strengths
Areas of Concern
The stock receives a Fundamental Health Score of 79.5/100 based on profitability, valuation, growth, and balance sheet metrics. The B grade reflects solid fundamentals with room for improvement in valuation or growth.
Fundamental Health Score
We analyze ARM's fundamental strength across five key dimensions:
Efficiency Score
WeakARM struggles to generate sufficient returns from assets.
Valuation Score
WeakARM trades at a premium to fair value.
Growth Score
ModerateARM shows steady but slowing expansion.
Financial Health Score
ExcellentARM maintains a strong and stable balance sheet.
Profitability Score
ModerateARM maintains healthy but balanced margins.
Key Financial Metrics
Is ARM Expensive or Cheap?
P/E Ratio
ARM trades at 245.95 times earnings. This suggests a premium valuation.
PEG Ratio
When adjusting for growth, ARM's PEG of 5.24 indicates potential overvaluation.
Price to Book
The market values Arm Holdings plc American Depositary Shares at 29.47 times its book value. This suggests the stock is fully valued or overvalued on an asset basis.
EV/EBITDA
Enterprise value stands at 187.47 times EBITDA. This signals the market has high growth expectations.
How Well Does ARM Make Money?
Net Profit Margin
For every $100 in sales, Arm Holdings plc American Depositary Shares keeps $20.25 as profit after all expenses.
Operating Margin
Core operations generate 17.30 in profit for every $100 in revenue, before interest and taxes.
ROE
Management delivers $13.00 in profit for every $100 of shareholder equity.
ROA
Arm Holdings plc American Depositary Shares generates $9.32 in profit for every $100 in assets, demonstrating efficient asset deployment.
Following the Money - Real Cash Generation
Operating Cash Flow
Arm Holdings plc American Depositary Shares generates strong operating cash flow of $2.10B, reflecting robust business health.
Free Cash Flow
Arm Holdings plc American Depositary Shares generates strong free cash flow of $1.48B, providing ample flexibility for dividends, buybacks, or growth.
FCF Per Share
Each share generates $1.38 in free cash annually.
FCF Yield
ARM converts 0.58% of its market value into free cash.
Financial Ratios Analysis
Valuation Ratios
P/E Ratio
Price to earnings ratio
245.95
vs 25 benchmark
PEG Ratio
Price/earnings to growth ratio
5.24
vs 25 benchmark
P/B Ratio
Price to book value ratio
29.47
vs 25 benchmark
P/S Ratio
Price to sales ratio
49.42
vs 25 benchmark
Financial Health
Debt/Equity
Total debt to shareholders' equity
0.05
vs 25 benchmark
Current Ratio
Current assets to current liabilities
5.25
vs 25 benchmark
Efficiency Ratios
ROE
Return on equity percentage
0.13
vs 25 benchmark
ROA
Return on assets percentage
0.09
vs 25 benchmark
ROCE
Return on capital employed
0.09
vs 25 benchmark
How ARM Stacks Against Its Sector Peers
| Metric | ARM Value | Sector Average | Performance |
|---|---|---|---|
| P/E Ratio | 245.95 | 35.65 | Worse (Expensive) |
| ROE | 13.00% | 651.00% | Weak |
| Net Margin | 20.25% | -138740.00% (disorted) | Strong |
| Debt/Equity | 0.05 | 0.26 | Strong (Low Leverage) |
| Current Ratio | 5.25 | 5.96 | Strong Liquidity |
| ROA | 9.32% | 227.00% | Weak |
ARM outperforms its industry in 3 out of 6 key metrics, particularly excelling in Net Margin, but lagging in P/E Ratio.
Historical Growth Performance
5-Year Growth Trajectory
This section reviews Arm Holdings plc American Depositary Shares's 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.
Revenue CAGR
93.17%
Industry Style: Growth, Innovation, High Beta
High GrowthEPS CAGR
99.47%
Industry Style: Growth, Innovation, High Beta
High GrowthFCF CAGR
-68.54%
Industry Style: Growth, Innovation, High Beta
Declining