ADT Inc. Executive Summary ADT Inc. is a U.S.-focused security and monitoring services company with a cash-generative operations profile and a history of volatile reported earnings. Financial Strengths The company’s cash-generation strength is evident: trailing twelve‑month operating cash flow was $1.88B versus trailing twelve‑month net income of $596.0M , and the cash conversion ratio is 3.1616 ,
ADT Inc. is a U.S.-focused security and monitoring services company with a cash-generative operations profile and a history of volatile reported earnings.
The company’s cash-generation strength is evident: trailing twelve‑month operating cash flow was $1.88B versus trailing twelve‑month net income of $596.0M, and the cash conversion ratio is 3.1616, while reported free cash flow margin was 0.9754 — all pointing to operating cash materially exceeding accounting earnings (Earnings Quality Analysis and Strategic Capital Allocation). Return on equity has also recovered strongly, reaching 15.8% in the most recent period (2025-12-31), and valuation on a trailing P/E has compressed to about 9.5x most recently, down from the 300x+ spikes seen in 2023 (Return on Equity (ROE) and Price-to-Earnings (PE) Ratio Trend).
At the same time, several areas warrant caution. Liquidity is constrained: the current ratio is 0.6348, below 1.0, indicating short‑term coverage pressure on the balance sheet. Reported net income has been highly volatile historically (net income volatility metric 0.2200), despite the recent positive TTM result of $596.0M; quarterly net income has swung materially in past years (Revenue & Net Income and Earnings Quality). Top‑line per‑share trends also look weak: revenue per share peaked at $11.31 on 2021-06-30 and fell to $2.17 by 2023-12-31 even as diluted EPS rose to $0.85 in 2025, reflecting a notable divergence between recent EPS gains and lower revenue per share (EPS Diluted & Revenue per Share).
Key fundamentals to monitor going forward include operating cash flow versus net income (OCF $1.88B vs NI $596.0M), the free cash flow margin (0.9754) and cash conversion ratio (3.1616) for sustained cash quality, the current ratio (0.6348) for short‑term liquidity, trends in revenue per share (most recent $2.17) and the 3‑year EPS CAGR metric (0.5114), and the trajectory of the trailing P/E (currently ~9.5x) alongside gross and net margin developments (Revenue & EPS Growth, Profit Margin Trends, Price-to-Earnings (PE) Ratio Trend).
The foundation of business quality and long-term value creation
ADT Inc.'s reported quarterly revenue has moved materially lower versus the earlier multi-quarter >$1B readings in 2018–2023. Recent revenue points show $431.3M in 2024-03-31 and $412.2M in 2026-03-31, with the most recent quarter slightly below the 2024 Q1 level and well under the $1.52B reported in 2023-12-31 and $1.60B in 2022-09-30.
Net income has been volatile historically, with multiple losses through 2018–2021 and intermittent negative quarters in 2023, shifting to sustained positive results across 2024–2025. Notable recent net income figures include $91.6M (2024-03-31), $409.5M (2024-12-31), $165.2M (2025-06-30), $145.1M (2025-09-30) and $285.6M (2025-12-31). The most recent quarterly revenue was $412.2M. The most recent quarterly net income was $285.6M.
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Period Information
Report Type: Annual (10-K)
Period: Jan 2023 to Dec 2023
Analyzing long-term margin stability and competitive positioning
ADT Inc.'s most recent gross margin observation is 33.6% as of 2023-12-31. Only a single gross margin data point is provided, so no multi-period trend can be calculated from the charted data; the value reflects the current trailing twelve-month gross profitability level reported for that period.
Net profit margins shown are negative across the available history:
The series shows a marked deterioration in 2020 followed by partial recovery by mid-2021. The most recent Gross Margin was 33.6% (2023-12-31) and the most recent Net Profit Margin was -5.0% (2021-06-30).
Understanding Profit Margins
Between Jan 2023 and Dec 2023, Adt Inc converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
ADT Inc.’s trailing twelve‑month net income shows a clear recovery over the period: large net losses through 2018–2020 (peaking at -$632.2M TTM in 2020) shifted to a positive earnings profile beginning in 2022 ($172.6M TTM) and accelerating to $501.1M TTM in 2024 and $596.0M TTM in the most recent 2025 TTM. The earnings improvement is the most pronounced recent trend in the chart.
Operating cash flow (TTM) has been consistently positive and materially higher than net income across recent periods. OCF was $1.37B TTM in 2020, rose to $1.89B TTM in 2022, dipped to $1.66B TTM in 2023, and recovered to $1.88B TTM in the latest 2025 TTM. The most recent trailing twelve‑month operating cash flow was $1.88B and the most recent trailing twelve‑month net income was \$596.0M.
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
ADT Inc.'s ROE shows a clear recovery over the sample period after a prolonged negative phase. ROE was deeply negative through 2019–2020, reaching a trough of -23.6% in the quarter ending , then improved through 2021 and turned positive by the quarter ending at 5.0%. The metric was essentially flat at 0.4% in both and before rising sharply in the latest reported period.
The most recent observation marks a notable inflection: ROE increased to 15.8% for the period ending , moving the company back into materially positive territory compared with the prior multi-year negatives and low single-digit positives. The most recent ROE was 15.8% (period ending ).
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
ADT Inc.'s operating cash flow (TTM) has been relatively stable in recent years: it was $1.89B at 2022-12-31, declined to $1.66B at 2023-12-31, and rose back to $1.88B by 2025-12-31, showing a recovery into late 2025.
Investing cash flow moved from a large outflow of -$1.53B at 2022-12-31 to net positive TTM values in 2023 and early 2024 ($242.5M at 2023-12-31 and $278.5M at 2024-03-31), marking a clear inflection in investment activity between 2022 and 2023.
Financing cash flow has been consistently negative in recent periods and shows a notable spike in outflow at 2023-12-31 (-$2.14B), followed by sustained negative TTM levels through 2024–2026 (ranging roughly from -$515M to -$861.9M). The most recent financing TTM improved from -$861.9M at 2025-12-31 to -$729.9M at 2026-03-31.
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
ADT Inc.'s trailing twelve‑month P/E shows a pronounced spike in 2023 followed by a sharp contraction. The series moves from 36.3x at 2022‑12‑31 to a peak of 366.3x at 2023‑03‑31, then declines to 290.9x at 2023‑06‑30 and 47.1x at 2023‑09‑30, marking the major inflection during 2023. After that inflection the P/E continued to compress through 2024 and into 2025.
In the most recent quarters the P/E has settled into single digits, easing slightly from 9.7x at 2024‑12‑31 to 9.5x at 2025‑12‑31. The most recent Price-to-Earnings ratio observed was 9.5x.
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.