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Allison Transmission Holdings (ALSN) has recently drawn investor attention after a strong move in its share price, with returns over the past 3 months and year to date indicating renewed interest in the business.
See our latest analysis for Allison Transmission Holdings.
The recent 9.1% 1 month share price return and 44.1% 3 month share price return, along with a strong multi year total shareholder return profile, suggest momentum has been building around Allison Transmission Holdings, with the latest share price at $117.79.
If Allison’s recent run has you thinking about where else strong trends could emerge, take a look at our screener of 25 power grid technology and infrastructure stocks as another way to uncover infrastructure linked opportunities.
With Allison trading at $117.79, slightly above the analyst price target of $114.80 but with an estimated intrinsic value suggesting around 51% upside, an important question arises: is there still a buying opportunity here, or is the market already pricing in future growth?
Against the latest close of $117.79, the most followed narrative pegs Allison Transmission Holdings’ fair value at $100.20 using a 9.19% discount rate.
Allison’s market share gains and new contract wins in defense and outside North America markets are increasing its exposure to durable, higher margin business lines, which alongside a more resilient aftermarket and operational efficiency initiatives, are expected to strengthen overall earnings power and expand margins going forward.
Curious how this view gets to a higher earnings base and still uses a single digit P/E multiple on future profits? The full narrative spells out the revenue build, margin path, and discount rate assumptions driving that $100.20 figure.
Result: Fair Value of $100.20 (OVERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, this view could be challenged if the shift toward fully electric drivetrains accelerates faster than expected or if the Dana Off-Highway integration encounters difficulties.
Find out about the key risks to this Allison Transmission Holdings narrative.
Those narratives indicate that Allison is 18% overvalued at $117.79, while our DCF model suggests the shares are trading about 51% below an intrinsic value of $242.22. When one approach points to overvaluation and another to undervaluation, which set of assumptions do you place more weight on?
