ADT Inc. (ADT - Get Rating) provides security, interactive, and innovative home solutions to serve residential, small business, and commercial customers in the United States. Its segments include Consumer and Small Business (CSB); Commercial; and ADT Solar business (Solar).

On October 13, 2022, ADT announced that it had issued and sold in a private placement to State Farm 133.3 million shares (approximately 15% stake) of ADT common stock for a gross purchase price of $1.2 billion.

This sale deepened the partnership between the companies, initially announced on September 6. ADT President and CEO Jim DeVries described this partnership as a significant future growth catalyst for ADT as the company expects to deliver safe, smart, and sustainable solutions through innovative offerings, unrivaled safety, and premium experiences.

This strategic alliance has helped the company showcase innovations in safety for home, mobile, and commercial applications at CES 2023 that are aimed at connecting and protecting more people at home, at work, and on the go.

The stock has gained 22.8% over the past six months to close the last trading session at $8.73, above its 200-day moving average of $7.89.

Let’s closely examine the factors that make it worthy of investment.

Decent Track Record

Over the last three years, ADT’s revenues have grown at a 6.9% CAGR. During the same period, the company’s income from operations also registered an impressive 18 % CAGR respectively.

Robust Financials

For the third quarter of the fiscal year 2022 ended September 30, ADT’s total revenue increased 21.8% year-over-year to $1.60 billion, while the company’s adjusted EBITDA grew 11.9% year-over-year to $620 million.

ADT reported an adjusted net income of $83 million or $0.10 per share, compared to an adjusted net loss of $54 million or $0.07 per share in the previous-year quarter.

Favorable Analyst Estimates

Analysts expect ADT’s revenue for the fiscal year ended December 2022 to come in at $6.37 billion, up 20% year-over-year. During the same period, the company’s EPS is expected to come in at $0.53, compared to a loss of $0.25 per share during the previous fiscal.

For fiscal 2023, ADT’s revenue and EPS are expected to increase 7.8% and 34.9% year-over-year to come in at $6.86 billion and $0.72, respectively.

POWR Ratings Reflect Promising Prospects

ADT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ADT has an A grade for Growth and a B for sentiment, in sync with its decent track record and favorable analyst estimates.

ADT is ranked #5 of 60 stocks in the Home Improvement & Goods industry.

Click here for additional POWR Ratings for ADT’s Value, Stability, Momentum, and Quality.

Bottom Line

ADT’s robust financials, sustainable transition to profitability, and favorable analyst estimates indicate the company’s fundamental strength and increasing intrinsic value. The management has underscored its confidence in ADT’s prospects by repurchasing 133.33 million shares of its common stock by October 26, 2022, for a total cost of $1.2 billion.

Given these factors, ADT appears well-positioned to reward its investors even in the turbulent macroeconomic climate of 2023.

How Does ADT Inc. (ADT) Stack up Against Its Peers?

While ADT has an overall POWR Rating of B, which equates to a Buy, investors could also consider looking at its A-rated industry peers: Acuity Brands, Inc. (AYI - Get Rating), HNI Corporation (HNI - Get Rating), and Bassett Furniture Industries, Incorporated (BSET - Get Rating).

ADT shares were trading at $8.75 per share on Friday afternoon, up $0.02 (+0.23%). Year-to-date, ADT has declined -3.53%, versus a 3.29% rise in the benchmark S&P 500 index during the same period.

About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...

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