Arm Holdings plc American Depositary Shares (ARM)

FairStock Score: 51/100 — MIXED

Key Financials

Strengths

• Generates $825 million in annual free cash flow (0.4% yield on market cap)
• Solid return on equity of 11.3% above cost of capital
• Conservative balance sheet with debt-to-equity of just 0.06, providing financial flexibility
• Altman Z-Score of 56.6 confirms minimal bankruptcy risk and strong solvency
• Revenue growth of 26.4% demonstrates strong top-line momentum

Concerns

• Trades significantly above Graham Number ($11) with negative 1756% margin of safety—limited downside protection

AI Analysis

Arm Holdings plc American Depositary Shares is a mega-cap technology company valued at $219.4 billion. The business generates $4.7 billion in annual revenue with a 4.8% net margin and $825 million in free cash flow. From a quality standpoint, Arm shows Altman Z-Score of 56.6 confirms fortress-level solvency and adequate 11% ROE. On valuation, the stock is commanding a steep 272.8x multiple, with trades far above its Graham Number ($11) with no margin of safety. Growth dynamics show revenue growing at 26.4% and profit growth of -11.5%. Our composite FairStock Score of 40/100 reflects below-average fundamentals overall. The premium valuation demands continued execution and leaves limited room for disappointment.

Bull Case

Arm's 26% revenue growth trajectory could accelerate as it captures additional market share in the technology sector. With $825 million in annual free cash flow (0.4% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

At 273x earnings, any growth disappointment triggers rapid multiple compression—a 20% earnings miss plus multiple contraction to 20x implies 40%+ downside. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer