ARM

We rate ARM HOLDINGS PLC /UK (ARM) as a Hold with a composite score of 55.9/100 at a current price of $128.34. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in quality (84th percentile) and value (59th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (29th percentile) and investment (33th percentile) tempers our overall conviction. We assign a Wide Moat rating (73/100), High uncertainty, and Exemplary capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

ARM HOLDINGS PLC /UK holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 55.9/100 places it at rank #1156 in our full 7,333-stock universe. With a $113.5B market capitalization, ARM HOLDINGS PLC /UK operates at meaningful scale within the Manufacturing sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 24%, though momentum at the 29th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 97% (+54.5pp vs sector) narrow to operating margins of 21% (+19.4pp vs sector) and net margins of 19.8%, yielding a gross-to-net conversion rate of 20%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $128.34, ARM HOLDINGS PLC /UK is trading near fair value based on current fundamentals. Our value factor score of 59/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at EV/EBITDA of 32.0x (at a premium), P/B of 19.5x, P/S of 8.3x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a High uncertainty rating to ARM HOLDINGS PLC /UK. Key risk factors include elevated market sensitivity (beta of 2.14). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 2.14). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 46th percentile and quality factor at the 84th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 97% provide a buffer against cost pressures; conservative leverage (0% D/E) limits balance sheet risk; large-cap scale ($113.5B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate ARM HOLDINGS PLC /UK's capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 46.3%, disciplined leverage (0% D/E), best-in-class net margins of 19.8%. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — ARM HOLDINGS PLC /UK meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. We note that the combination of 35.5% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, ARM HOLDINGS PLC /UK receives a Hold rating with a composite score of 55.9/100 (rank #1156 of 7,333). Our quantitative framework assigns a Wide Moat (73/100, trend: stable), High uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 50/100.

Our analysis supports a neutral stance on ARM HOLDINGS PLC /UK. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.