Arm Holdings plc American Depositary Shares (ARM)
Valuation Overview•Is Arm Holdings plc American Depositary Shares Overvalued or Undervalued?
Priced at a premium to peer multiples and intrinsic cash flows, demanding strong execution to justify current levels.
Moderate quality score of 74/100, reflecting stable operating margins and manageable leverage.
Analysts remain cautious, with consensus price targets indicating limited room for upside expansion.
Verdict: Solid fundamental quality, though profitability presents a headwind.
Wall Street is cautious, forecasting potential downside alongside robust expected earnings growth. The company currently retains all capital for reinvestment and growth rather than returning it to shareholders.
ARM demonstrates strong business quality with robust profitability and healthy margins. This is backed by a fortress balance sheet, holding significant net cash ($2.3B) and minimal debt risk.
The company is driving exceptional top-line expansion (22.5% 3Y CAGR) paired with robust earnings compounding (18.6% EPS 3Y CAGR). The company maintains healthy operational efficiency with a 18.3% operating margin.
| Financial Metric | Trend (12Q) | Latest Qtr | 1Y Growth | 3Y CAGR | 5Y CAGR | 10Y CAGR |
|---|---|---|---|---|---|---|
| Revenue | $1.5B | +22.8% | +22.5% | — | — | |
| EBITDA | $511.0M | — | +10.9% | — | — | |
| Net Income | $313.0M | +14.1% | +19.9% | — | — | |
| EPS (Diluted) | $0.29 | +13.3% | +18.6% | — | — | |
| Free Cash Flow | $186.0M | +450.0% | +14.9% | — | — |
| Metric | TTM | 3Y Avg | 5Y Avg | 10Y Avg |
|---|---|---|---|---|
| Gross Margin | 94.6% | 93.4% | 92.9% | 92.9% |
| Operating Margin | 18.3% | 14.1% | 18.5% | 18.5% |
| Net Margin | 18.4% | 15.9% | 17.5% | 17.5% |
| FCF Margin | 19.8% | 17.9% | 18.4% | 18.4% |
| Quarter | EPS Est. | EPS Act. | Surprise | EPS | Rev |
|---|---|---|---|---|---|
| Q2'26Latest | $0.58 | $0.60 | +3.4% | ||
| Q1'26 | $0.41 | $0.43 | +4.9% | ||
| Q4'25 | $0.33 | $0.15 | -54.4% | ||
| Q3'25 | $0.35 | $0.35 | +0.3% | ||
| Q2'25 | $0.53 | $0.55 | +4.8% | ||
| Q1'25 | $0.34 | $0.40 | +17.0% | ||
| Q4'24 | $0.25 | $0.10 | -60.0% | ||
| Q3'24 | $0.34 | $0.40 | +17.0% |
Total return is +200.9% (1Y), outperforming the benchmark by +175.9%
| Period | Total Return | vs S&P 500 (Alpha) | Dividend Contribution |
|---|---|---|---|
| YTD | +283.0% | +273.7% | — |
| 1Y | +200.9% | +175.9% | — |
| 3YCAGR | +93.4% | +70.8% | — |
| 5YCAGR | +48.6% | +34.7% | — |
| 10YCAGR | +21.9% | +7.7% | — |
The S&P 500 is at 31.3x trailing P/E — Expensive relative to historical averages.
Quick answers to common questions about Arm Holdings plc American Depositary Shares (ARM) valuation, health, and returns.
Arm Holdings plc American Depositary Shares is estimated to be overvalued under our discounted cash flow framework. relative multiples indicate the stock is Expensive versus peers compared to industry peers. overvalued (implying -71.8% downside from DCF intrinsic value of $123.89)
Arm Holdings plc American Depositary Shares has multiple valuation anchors: DCF Intrinsic Value: $123.89 | Peer Relative Fair Value: $90.78 | Wall Street Analyst Target: $271.00 (implying -38.3% upside). A convergence of these signals offers higher conviction.
Arm Holdings plc American Depositary Shares displays good financial health with a composite quality score of 74/100, supported by a Altman Z-Score of 100.0 (safe zone), Piotroski F-Score of 5/9, Return on Invested Capital (ROIC) of 12.3%.
Arm Holdings plc American Depositary Shares does not return material capital to shareholders via dividends or share repurchases, electing to retain earnings to fund internal growth.
Arm Holdings plc American Depositary Shares's current growth trajectory is Stable. The company achieved +22.8% 1Y revenue growth and +13.3% 1Y EPS growth, compared to its 3Y revenue CAGR of +22.5%.
Wall Street consensus is Buy based on 27 analysts, beating EPS expectations in 82% of recent quarters with a 2-quarter streak. The consensus price target represents a -38.3% change from current levels.
Investment risks for Arm Holdings plc American Depositary Shares include: -41.5% 1-year max drawdown, high beta (3.05x market volatility). Volatility risk is characterized by a beta of 3.05x.
No. These computations are purely quantitative model outputs for informational purposes. They do not account for qualitative management shifts or macro events. Always consult a licensed RIA before buying or selling shares.
Disclaimer: This page is for informational purposes only and does not constitute financial advice. All valuation models, scores, and target estimates are automated computations under stated assumptions and should not be relied upon as the sole basis for any investment decision.