Seeking Alpha: Sentiment May Be Gaining On Allison Transmission

I was bullish on Allison Transmission (ALSN) in early October ("Allison Transmission A Stand-Out In Multiple Ways"), and I cannot complain about the 18% move since then as it has outpaced the S&P 500 and other truck component companies like Cummins (CMI) and Dana (DAN). Management has recently confirmed that improving North American truck orders are starting to flow through to their order books and that the fracking market is coming back to life.

I still really like the long-term idea of Allison as a share-gainer in the commercial vehicle transmission market, but I am a little concerned that analyst and investor enthusiasm is running ahead of the underlying vehicle markets. A 12x EBITDA multiple only gets the stock to about $30 and that's a pretty strong multiple relative to the company's likely growth rate. There is certainly a chance that the recoveries in Allison's markets will lead to outperformance and/or that the company will gain share in OUS markets faster than expected, but I don't see Allison as quite the bargain it was about six months ago.

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Sentiment May Be Gaining On Allison Transmission