Arlo’s stock price has taken a beating over the past six months, shedding 28.4% of its value and falling to $11.83 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.

Given the weaker price action, is now an opportune time to buy ARLO? Find out in our full research report, it’s free.

Why Does ARLO Stock Spark Debate?

With its name deriving from the Old English word meaning “to see,” Arlo (NYSE: ARLO) provides home security products and other accessories to protect homes and businesses.

Two Positive Attributes:

1. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Arlo’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.

2. Increasing Free Cash Flow Margin Juices Financials

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Arlo’s margin expanded by 12.7 percentage points over the last five years. We have no doubt shareholders would like to continue seeing its cash conversion rise as it gives the company more optionality. Arlo’s free cash flow margin for the trailing 12 months was 9.6%.

One Reason to be Careful:

Long-Term Revenue Growth Disappoints

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Arlo grew its sales at a mediocre 7.2% compounded annual growth rate. This fell short of our benchmark for the industrials sector.

Final Judgment

Arlo’s merits more than compensate for its flaws. With the recent decline, the stock trades at 24.6× forward price-to-earnings (or $11.83 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More Than Arlo

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