ALLISON TRANSMISSION HOLDING (NYSE:ALSN) – A Potentially Undervalued Stock with Strong Fundamentals

ALLISON TRANSMISSION HOLDING (NYSE:ALSN) was identified as a decent value stock by our screener, which looks for companies with solid fundamentals and attractive valuations. ALSN stands out with strong profitability, healthy financials, and reasonable growth, all while trading at a discount relative to its industry. Below, we break down why this stock may appeal to value investors.

Valuation

ALSN’s valuation metrics suggest the stock is priced attractively:

• P/E Ratio: At 10.89, ALSN trades below both the industry average (54.20) and the S&P 500 average (26.86).
• Forward P/E: 9.35 indicates continued undervaluation compared to peers.
• Enterprise Value/EBITDA: The ratio is lower than 82% of industry competitors, reinforcing its cheap valuation.

These figures suggest ALSN is priced conservatively despite its strong fundamentals.

Profitability

The company excels in profitability, with key strengths including:

• Return on Equity (ROE): 45.29%, outperforming 96% of peers.
• Operating Margin: 31.45%, ranking better than 99% of the industry.
• Profit Margin: 23.55%, placing it near the top of its sector.

These high margins and returns indicate efficient operations and pricing power.

Financial Health

ALSN maintains a solid financial position:

• Current Ratio: 3.05 shows ample liquidity to cover short-term obligations.
• Quick Ratio: 2.37 further confirms strong liquidity.
• Debt Management: While the Debt/Equity ratio (1.44) is higher than ideal, the company’s strong cash flow generation helps mitigate concerns.

Growth

While not a high-growth stock, ALSN shows steady expansion:

• EPS Growth: 15.35% over the past year, with a 5-year average of 11.10%.
• Revenue Growth: A modest but stable 3.86% yearly increase.
• Future Expectations: Analysts project continued, though slower, earnings growth (6.32% annually).

For value investors, ALSN presents a compelling case—strong profitability, sound financials, and a valuation that leaves room for upside.

Our Decent Value screener lists more stocks with similar characteristics and is updated daily.
For a deeper dive, review the full fundamental report on ALSN.

Disclaimer

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