Looking at Allegion (ALLE), the one issue that jumps out to me is a potential lack of drivers for better-than-expected performance. Certainly, Allegion has done well in recent years, with a good track record on adjusted operating margin performance, ROICs, and outperformance versus Assa Abloy (OTCPK:ASAZY) in electromechancial locks. I believe that is all well-understood by the Street, though, and reflected in the share price, which leads me to believe that Allegion will really need stronger-than-expected underlying markets in North America and/or a relatively near-term shift towards greater share in areas like Europe and China.
Between both discounted cash flow and margin/return-driven EV/EBITDA, I don’t see Allegion as much of a bargain now, and I see more risk from weaker end-market trends than I see upside from ongoing company-specific drivers. The quality of the business definitely makes it a name to reconsider at a lower price, but that’s not the case today.
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Allegion - Strong Performance Metrics, But Well-Understood Drivers And Opportunities
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