ALLEGION PLC (NYSE:ALLE) Stands Out as a High-Quality Buy-and-Hold Investment Under the Caviar Cruise Strategy

The Caviar Cruise stock screening strategy is built to find high-quality companies ideal for long-term, buy-and-hold investing. Based on the ideas of quality investing, this method focuses on businesses with solid revenue and profit growth, strong returns on invested capital, reasonable debt levels, and steady cash flow production. The process sorts companies using measurable financial data while recognizing that non-quantitative factors, such as competitive edges, pricing strength, and management skill, are also vital in assessing long-term prospects.

ALLEGION PLC (NYSE:ALLE) stands out as a strong option under this strategy, fitting many important standards that point to financial health and operational success.

Key Metrics That Support ALLE as a Quality Investment

1. Solid Revenue and EBIT Growth

• Revenue Growth (5Y CAGR): 7.20% – Allegion has maintained top-line growth above the Caviar Cruise minimum of 5%, showing stable demand for its security products.
• EBIT Growth (5Y CAGR): 6.69% – The company’s operating profit growth exceeds revenue growth, suggesting better operational efficiency and possible pricing strength.

2. Strong Return on Invested Capital (ROIC)

• ROIC (Excluding Cash & Goodwill): 51.92% – This outstanding number highlights Allegion’s skill in producing significant returns from its main activities, well above the 15% standard set by the Caviar Cruise screen. A high ROIC is a key trait of a quality business, as it points to smart capital use and competitive edges.

3. Stable Debt and Cash Flow Position

• Debt-to-Free Cash Flow: 3.03 – Allegion’s debt is under control, needing just over three years of current free cash flow to settle. This matches the Caviar Cruise preference for companies with a ratio under 5, ensuring financial adaptability.
• Profit Quality (5Y Avg.): 102.45% – The company turns net income into free cash flow at a notable rate, showing earnings are supported by actual cash production rather than accounting changes.

4. Profitability and Margin Consistency
Allegion’s fundamentals display strong margins and profitability:

• Operating Margin: 21.04% (better than 90% of industry peers)
• Gross Margin: 44.83% (leading in the building products sector)
• Steady Dividend Growth: 12.34% CAGR over time, backed by sustainable payout ratios.

Fundamental Analysis Summary

A closer look at Allegion’s fundamental analysis report confirms its appeal for quality investors:

• Profitability Score: 9/10 – Outstanding returns on equity (35.05%) and assets (12.74%) show efficient operations.
• Health Score: 7/10 – Good liquidity (Current Ratio: 2.30) and solvency (Altman-Z Score: 4.83) reduce financial risk.
• Valuation: Fair – While not inexpensive, Allegion trades similarly to industry peers and has a reasonable PEG ratio given its growth path.

Non-Quantitative Strengths

Beyond the data, Allegion gains from:

• Global Reach: Operations cover North America, Europe, and Asia, lessening regional reliance.
• Brand Collection: Recognized names like Schlage and Von Duprin boost pricing strength and customer loyalty.
• Economic Resilience: Security products stay necessary in all market conditions.

Finding Other Quality Options

For investors looking for similar high-quality stocks, the Caviar Cruise screener offers a selected list of companies meeting these strict standards.

Disclaimer: This article is not investment advice. Perform detailed research or consult a financial advisor before making investment choices.