ALLEGION PLC (NYSE:ALLE) – A Quality Stock Worth Considering

ALLEGION PLC (NYSE:ALLE) was identified through our Caviar Cruise stock screener, which focuses on high-quality companies with strong financials and sustainable growth. ALLE stands out due to its solid profitability, efficient capital allocation, and consistent revenue growth. Below, we examine why this stock aligns with quality investing principles.

Key Strengths of ALLEGION PLC

• High Return on Invested Capital (ROIC): ALLE delivers an impressive ROIC of 52.77%, well above the 15% threshold for quality stocks. This indicates efficient use of capital to generate profits.
• Strong Revenue and EBIT Growth: Over the past five years, revenue grew at a 6.95% annual rate, while EBIT growth averaged 6.69%. This steady expansion reflects a well-managed business.
• Healthy Debt Management: The company’s debt-to-free cash flow ratio stands at 3.11, meaning it could repay its debt in just over three years using current cash flows—a sign of financial stability.
• Profit Quality: ALLE converts net income into free cash flow at a rate of 102.45%, demonstrating high earnings quality and effective cash generation.

Fundamental Analysis Summary

Our fundamental report assigns ALLE a rating of 7 out of 10, highlighting its strong profitability, sound financial health, and reasonable valuation. Key takeaways include:

• Profitability: High margins (16.28% net, 21.07% operating) and superior returns (ROE of 38.70%) place ALLE ahead of most industry peers.
• Dividend Track Record: The company has raised dividends for at least 10 years, with a 12.34% average annual growth rate.
• Valuation: While not cheap, ALLE trades at a P/E of 18.58, in line with industry averages and below the S&P 500’s 26.68.

For investors seeking durable businesses with reliable growth, ALLEGION PLC presents a compelling case.

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Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own analysis before making investment decisions.