Arlo Technologies has been on fire lately. In the past six months alone, the company’s stock price has rocketed 57.7%, reaching $17.30 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now still a good time to buy ARLO? Or are investors being too optimistic? Find out in our full research report, it’s free.

Why Does Arlo Technologies Spark Debate?

Originally spun off from networking equipment maker Netgear in 2018, Arlo Technologies (NYSE: ARLO) provides cloud-based smart security devices and subscription services that help consumers and businesses monitor and protect their homes, properties, and loved ones.

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 Technologies’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 Technologies’s margin expanded by 17.4 percentage points over the last five years. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Arlo Technologies’s free cash flow margin for the trailing 12 months was 11.2%.

One Reason to be Careful:

Lackluster Revenue Growth

Long-term growth is the most important, but within business services, a stretched historical view may miss new innovations or demand cycles. Arlo Technologies’s recent performance shows its demand has slowed as its annualized revenue growth of 3.6% over the last two years was below its five-year trend.

Final Judgment

Arlo Technologies’s merits more than compensate for its flaws, and with the recent surge, the stock trades at 26× forward P/E (or $17.30 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.

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