Allison Transmission
ALSN
$121.11
-0.66%
Allison Transmission is the world's largest manufacturer of fully automatic transmissions for medium- and heavy-duty commercial vehicles, serving on-highway, off-highway, and military end markets. With approximately 60% global market share in on-highway applications, the company holds a dominant competitive position in a niche but essential automotive component market. The current investor narrative centers on the company's ability to sustain growth amid cyclical demand in commercial vehicle markets, while also focusing on margin expansion and the development of hybrid and fully electric powertrain technologies for future growth.…
ALSN
Allison Transmission
$121.11
ALSN 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Allison Transmission's 12-month outlook, with a consensus price target around $137.30 and implied upside of +13.4% versus the current price.
Average Target
$137.30
0 analysts
Implied Upside
+13.4%
vs. current price
Analyst Count
—
covering this stock
Price Range
$105 - $185
Analyst target range
The stock is covered by 10 analysts, with a consensus recommendation of 'buy' (mean recommendation 2.5 on a 1-5 scale, where 1 is strong buy). The average target price is $137.30, implying approximately 12.2% upside from the current price of $122.34. The distribution leans bullish, with the average target above the current price. The target range spans from a low of $105.00 to a high of $185.00, indicating significant uncertainty. The high target of $185.00 assumes strong growth and multiple expansion, while the low target of $105.00 prices in potential cyclical downturns or margin compression. The wide spread (low to high of $80) reflects high uncertainty, likely due to cyclical demand in commercial vehicles and the company's transition to electric powertrains. No recent upgrades or downgrades are noted, but the consensus remains bullish.
Bulls vs Bears: ALSN Investment Factors
Allison Transmission presents a compelling bull case with its dominant market share, strong profitability, and reasonable valuation. The company's 60% global market share and high margins (net margin 20.7%) provide a durable competitive advantage. However, the bear case centers on cyclical risk in commercial vehicle demand and the uncertainty around electric powertrain disruption. The stock's recent underperformance (down 9.7% in 3 months vs. S&P 500 up 3.5%) suggests near-term headwinds. The single most important tension is whether the company can sustain its high margins and growth amid a potential cyclical downturn and technological transition. Currently, the bull case has stronger evidence given the valuation support and analyst consensus, but the cyclical risk warrants caution.
Bullish
- Dominant Market Share in Niche: Allison holds approximately 60% global market share in on-highway automatic transmissions for medium- and heavy-duty commercial vehicles. This entrenched position provides pricing power and barriers to entry, supporting high margins.
- Strong Profitability and Margins: Net margin of 20.70% and operating margin of 32.33% are exceptional for the auto parts industry, reflecting efficient operations and pricing power. ROE of 33.37% indicates outstanding capital efficiency.
- Attractive Valuation with Upside: Trailing PE of 13.19x and forward PE of 10.73x are reasonable for a high-margin business. Analyst average target of $137.30 implies 12.2% upside from the current price of $122.34.
- Strong Free Cash Flow Generation: Free cash flow yield (based on PCF ratio of 9.98) is approximately 10%, indicating robust cash generation relative to market cap. This supports dividends (yield 1.1%) and debt reduction.
Bearish
- Cyclical Exposure to Commercial Vehicles: Revenue is tied to commercial vehicle demand, which is cyclical and sensitive to economic downturns. A recession could significantly reduce demand, impacting sales and earnings.
- Near 52-Week High, Limited Upside: Current price of $122.34 is at 88.9% of the 52-week range (high $137.62), suggesting much of the good news is priced in. The stock has underperformed the S&P 500 by 13.2% over the past 3 months.
- High Uncertainty in Analyst Targets: Analyst target range is wide ($105 to $185), reflecting significant uncertainty. The low target implies 14.2% downside from current price, highlighting risk of a cyclical downturn.
- Transition to Electric Powertrains: Allison is developing fully electric powertrains, which could disrupt its core transmission business. If EV adoption accelerates, the company's legacy products may face obsolescence.
ALSN Technical Analysis
The stock is in a sustained uptrend over the past year, with a 1-year price change of +39.04%, significantly outperforming the S&P 500's +16.47%. The current price of $122.34 sits at 88.9% of its 52-week range (low $76.01, high $137.62), indicating the stock is trading near the upper end but not at extremes, suggesting bullish momentum with room for further upside. Over the past 3 months, the stock has declined 9.72%, while the S&P 500 gained 3.50%, showing a divergence that could signal a temporary pullback or mean reversion. The 1-month price change of +2.22% versus the S&P 500's +0.78% indicates short-term momentum is recovering, potentially marking a reversal of the 3-month downtrend. The stock's beta of 0.946 suggests slightly lower volatility than the market, which is favorable for risk-adjusted positioning. Key support lies near the 52-week low of $76.01, while resistance is at the 52-week high of $137.62. A breakout above $137.62 would signal a continuation of the long-term uptrend, while a breakdown below $76.01 would indicate a bearish reversal.
Beta
0.95
0.95x market volatility
Max Drawdown
-20.6%
Largest decline past year
52-Week Range
$76-$138
Price range past year
Annual Return
+37.5%
Cumulative gain past year
| Period | ALSN Return | S&P 500 |
|---|---|---|
| 1m | +1.1% | +1.6% |
| 3m | -6.2% | +4.1% |
| 6m | +8.6% | +6.8% |
| 1y | +37.5% | +16.3% |
| ytd | +22.4% | +8.6% |
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ALSN Fundamental Analysis
Revenue growth has been robust, with the most recent quarterly revenue estimated at $6.44 billion (annualized) and a trailing twelve-month revenue of approximately $3.01 billion (based on PS ratio of 2.73 and market cap of $8.22B). The company has demonstrated strong growth, with a 1-year price change of 39% reflecting improving fundamentals. Net margin stands at 20.70%, indicating solid profitability, while gross margin is 48.37%, suggesting healthy pricing power and cost control. Operating margin of 32.33% is high for the auto parts industry, reflecting the company's niche dominance and efficient operations. The company is profitable with a trailing PE of 13.19 and forward PE of 10.73, implying expected earnings growth. Return on equity (ROE) is an impressive 33.37%, indicating efficient use of shareholder capital. The balance sheet shows a debt-to-equity ratio of 1.56, which is moderate but manageable given strong cash flow generation. The current ratio of 4.85 indicates ample liquidity, and free cash flow yield (based on PCF ratio of 9.98) is approximately 10%, suggesting strong cash generation relative to market cap.
Quarterly Revenue
N/A
N/A
Revenue YoY Growth
N/A
YoY Comparison
Gross Margin
N/A
Latest Quarter
Free Cash Flow
N/A
Last 12 Months
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Valuation Analysis: Is ALSN Overvalued?
Since net income is positive (net margin 20.70%), the primary valuation metric is the PE ratio. The trailing PE is 13.19x, while the forward PE is 10.73x, implying the market expects earnings growth of about 23% over the next year. The forward PE discount to trailing PE suggests optimistic growth expectations. Compared to the industry average PE (not provided, but auto parts typically trade at 10-15x), ALSN's trailing PE of 13.19x appears reasonable, potentially at a slight premium to the sector median. The PEG ratio is -1.13, which is negative due to negative earnings growth expectations (likely a data anomaly), but the forward PE suggests growth is anticipated. Historically, the stock's PE range is not provided, but given the 52-week price range of $76.01 to $137.62, the current price is near the upper end, implying the market is pricing in optimistic expectations. The PS ratio of 2.73x is moderate for a high-margin business, and the EV/EBITDA of 9.41x suggests reasonable valuation relative to cash earnings.
PE
13.2x
Latest Quarter
vs. Historical
N/A
5-Year PE Range 17x~59x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
9.4x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: Allison's debt-to-equity ratio of 1.56 is moderate, but the company operates in a cyclical industry. A downturn in commercial vehicle demand could pressure earnings and cash flows, potentially straining debt servicing. The net margin of 20.7% is high, but any compression due to pricing pressure or cost inflation would directly impact profitability. Revenue concentration in on-highway transmissions (60% market share) means a shift in customer preferences or technology could materially affect sales. The payout ratio of 14.6% is low, but dividend sustainability depends on consistent earnings.
Market & Competitive Risks: The stock's beta of 0.946 suggests slightly lower volatility than the market, but it is still sensitive to macro factors. The forward PE of 10.73x is reasonable, but if the market re-rates the sector lower due to recession fears, the stock could decline. Competition from manual and automated manual transmissions, as well as emerging electric drivetrain technology, poses a long-term threat. The wide analyst target range ($105-$185) reflects high uncertainty, and the stock's recent 3-month underperformance (-9.7% vs. S&P 500 +3.5%) indicates potential negative sentiment.
Worst-Case Scenario: In a severe recession, commercial vehicle demand could plummet, causing a sharp decline in revenue and earnings. Assuming a return to the 52-week low of $76.01, an investor could lose approximately 37.9% from the current price of $122.34. This scenario would likely involve multiple compression (PE falling to 8-9x) and earnings downgrades. The historical max drawdown of -20.58% provides a less extreme but still significant downside reference.