Allegion PLC (ALLE, Financial) has recently shown a notable daily gain of 5%, adding to a 3-month gain of 2.51%. With an Earnings Per Share (EPS) of 6.31, investors are considering whether the stock is modestly undervalued. This analysis aims to explore the intrinsic value of Allegion PLC and provide investors with a comprehensive valuation assessment. We invite you to delve into the following analysis to understand the true value of Allegion PLC's stock.
Company Introduction
Allegion PLC is a leading global security products company, boasting prominent brands such as Schlage, Von Duprin, and LCN. Since its inception from Ingersoll-Rand in December 2013, Allegion PLC has established a significant presence, primarily in the United States, which accounts for 73% of its sales. Competing with giants like Assa Abloy and Dormakaba, Allegion PLC's current stock price of $110.34 is set against a GF Value of $144.39, suggesting a potential undervaluation. This initial comparison sets the stage for a deeper dive into the company's financial health and market position.
Summarizing the GF Value
The GF Value is an exclusive metric that determines the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. Allegion PLC's current market cap of $10.20 billion and a stock price of $110.34 suggest that the stock may be modestly undervalued. This valuation implies that Allegion PLC's stock could offer higher long-term returns than its business growth alone might indicate.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
Assessing a company's financial strength is crucial in mitigating the risk of permanent capital loss. Allegion PLC's cash-to-debt ratio of 0.18 ranks lower than 78.06% of its peers in the Business Services industry, signaling a need for careful analysis. However, with an overall financial strength rating of 6 out of 10, Allegion PLC's financials are considered fair.
Profitability and Growth
Investing in profitable companies, particularly those with consistent profitability, is generally less risky. Allegion PLC's operating margin of 19.59% stands out, ranking higher than 84.83% of companies in the Business Services industry. With a decade of profitability, a revenue of $3.60 billion, and an EPS of $6.31, Allegion PLC's profitability rank is a robust 9 out of 10.
Growth is a pivotal valuation factor, often correlated with a company's stock performance. Allegion PLC's 3-year average revenue growth rate outperforms 56.54% of companies in its industry, although its EBITDA growth rate of 6.2% is less competitive, ranking lower than 59.13%.
ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is another way to gauge profitability. Allegion PLC's ROIC of 20.28 is more than double its WACC of 8.58, indicating value creation for shareholders.
Conclusion
Overall, Allegion PLC (ALLE, Financial) appears modestly undervalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks below a majority of its peers in the Business Services industry. For a more detailed understanding of Allegion PLC's financials, investors are encouraged to review its 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, consider exploring the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
