ALLISON TRANSMISSION HOLDINGS, INC. (ALSN): what the price assumes

In the published model solve dated 2026-Q2, anchored at $131.24, ALLISON TRANSMISSION HOLDINGS, INC. (ALSN) is priced for +2.6% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/ALSN

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 7.8% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.8%); the inversion above states its own rate.

Per-Model Detail (n=15)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Allison converts about 24.6 cents of every revenue dollar into operating profit, more than six points clear of the next-best converter among the suppliers it is compared with, and that gap is the entire reason the shares carry what they do.
• The pressure sits in the legacy franchise rather than the new one: North America on-highway sales fell $60 million, or 14%, in the March 2026 quarter, and the 2025 gross profit decline traced to volume rather than to any loss of pricing.
• The August 3 second-quarter call is the next marker, and the question it answers is whether the acquired off-highway operations earn anything close to the transmission business they joined.

Bull Case

The market's opening assumption on Allison is that the business gets slightly smaller. At roughly 15 times operating profit, today's price is consistent with company-wide operating profit declining about 1.2% a year over five years. Now set that against what the company does with a dollar of revenue. About 24.6 cents of it reaches operating profit. Among the suppliers Allison is measured against, nobody else is close: Gentex converts 18.4%, Atmus 17.0%, Dorman 12.9%, Autoliv 9.7% and BorgWarner 4.4%. The shares are not being valued as though that advantage lasts.

The advantage comes from a position that is awkward to attack from underneath. Allison builds fully automatic transmissions for medium- and heavy-duty commercial vehicles, and in the heavy-duty off-highway end market the 10-K names exactly one significant rival: "Our major competitor in this end market for 2025 was Twin Disc." That is not a crowded field, and it shows up where pricing power always shows up. Volumes fell in 2025 and gross profit went with them, down to $1,463 million from $1,529 million. The 10-K attributes that to $223 million of lower net sales and $45 million of unfavorable direct material costs, offset in part by $140 million from increases the company put through on certain products. The shape of the decline is the point: it was a volume year, not a pricing year.

Two lines inside the mix moved the other way. Defense rose sharply, with the 10-K reporting that "Defense end market net sales were up 26% for the year ended December 31, 2025 compared to the year ended December 31, 2024", driven by tracked-vehicle demand and higher realized prices. And in the part of the market usually described as the end of this business, Allison recorded "market share gains for hybrid propulsion systems for transit buses". The propulsion transition that is supposed to obsolete a transmission maker is, so far, a place where this one is taking share.

Then there is the January purchase of Dana Incorporated's off-highway drive and motion systems business, the largest acquisition Allison has made, which extends its end markets into agriculture, construction, mining and energy. Management's stated expectation for the year is straightforward: "In 2026, we expect to have higher net sales driven by the addition of Allison Off-Highway". Underneath that, capital is still coming back to holders. The 10-K reports approximately $328 million of stock repurchased during 2025, with about $1,192 million remaining under an authorization the board has raised to $5,000 million in total, and the share count has fallen about 4% a year across the four years to March 2026. A buyer today pays a mid-teens multiple of operating profit for the best converter of revenue in its comparison set, spread across a share count that shrinks every year.

Bear Case

What is being chipped away is not the product. It is the position. Allison's advantage rested on selling a component that truck makers found easier to buy than to build, and the 10-K now catalogues the reasons a customer might stop: shifts in customer strategy, a customer acquiring a transmission maker of its own, low-cost production abroad. The conclusion is stated without softening: "these OEMs may use products produced internally". Nothing about a 24.6% operating margin discourages a customer from asking whether it still wants to pay for one.

The erosion shows up in sales lines rather than in one dramatic quarter. Legacy off-highway halved in 2025, with the filing reporting that "Global Off-Highway end market net sales decreased $52 million, or 50%". In the March 2026 quarter, "Allison Transmission segment generated $733 million of net sales for the three months ended March 31, 2026.", down 4% against the prior year, with North America on-highway alone accounting for $60 million of that, a 14% fall. That is the core franchise, and it was smaller than a year earlier. Higher realized prices covered part of the 2025 volume decline, which is exactly what pricing power is for. Doing it again in consecutive years is a different exercise.

The propulsion transition cuts both ways, and the company's own language about its newer products is unhedged: "there can be no guarantee of future market acceptance and investment returns". The Dana purchase, whatever it does for scale, also widens the field of competitors rather than narrowing it. The 10-K says so plainly: "we now face competition in these expanded end markets". Buying into agriculture, construction and mining spreads the revenue base and dilutes the specific thing that made Allison unusual, which was operating in an end market where it had almost no peer.

Connect that to what the price asks. It does not ask for growth, which is the bull's strongest card, but it does ask the profit stream to hold roughly where it is: operating profit declining no faster than about 1.2% a year is the assumption embedded in the quote. A franchise losing volume in its largest end market while integrating a lower-margin acquisition is not obviously a business that holds flat, and if the profit base drifts instead, the multiple the shares carry has to do the adjusting. The balance sheet has less room to absorb that than it once did. Net debt runs about $4.0 billion, and the 10-K's credit-rating table shows corporate credit at Ba1 from Moody's and BB+ from Fitch, both below investment grade. The company also warns that "We anticipate increased capital expenditures and cash income taxes in 2026 compared to 2025." and that "We expect to incur significant costs in connection with the integration of the Acquired Off-Highway Business." Both land on the same cash that services the borrowings and funds the buyback.

Valuation

Today's quote carries an assumption, and it is a mild one. At $122.29 the shares trade at roughly 15 times operating profit, and inverted, that price is consistent with company-wide operating profit falling about 1.2% a year over five years. For a business earning 24.6% operating margins, being asked to shrink slightly is not a heavy requirement. Against Allison's own recent record the near-term pace sits inside what it has delivered; the stretch, such as it is, lies in how long the assumption must hold rather than in the rate itself.

The methods disagree about it, and the direction of the disagreement is the useful part. The discounted cash-flow work lands above today's price, one route reaching it only because the exit EV/EBITDA multiple is held flat at today's level through the projection. Peer-multiple methods land modestly under. The earnings-power methods, which take a five-year average of operating income, add back one-time charges, credit no growth whatsoever and capitalize the result at the cost of capital, land at roughly a third of the price. Book-value methods sit lower still. Almost the entire spread reduces to one question: whether this profit stream compounds gently and indefinitely or does not grow at all. The price sits on the first side of it.

Where Allison stands against its comparison set is not ambiguous. Its 24.6% operating margin leads that group, and it leads by a wide gap. The nearest converters of revenue into operating profit are Gentex at 18.4 cents on the dollar and Atmus at 17.0, while BorgWarner, on close to four times Allison's revenue, manages 4.4. Paying above peer multiples for the best conversion rate in a cohort is a defensible trade. It also means there is no cushion in the multiple if that conversion rate drifts toward the group.

The filing-sourced inputs underneath the arithmetic are worth naming, because they carry the weight. Reported gross profit was $1,463 million in 2025 against $1,529 million the year before, a volume-driven decline. The transmission segment produced $733 million of net sales in the March 2026 quarter. Share count has fallen about 4% a year over the four years to March 2026, so per-share arithmetic improves even in a year when total profit does not.

The balance sheet is where the acquisition becomes visible. Liquid assets on the balance sheet totaled $311 million as of the latest reporting date, a modest reserve for a business that has just spent heavily to widen its end markets. Net debt is about $4.0 billion, and the borrowings behind it are set out in the 10-K: a term loan due 2031 alongside senior notes at 4.75% due 2027, 5.875% due 2029, 3.75% due 2031 and 5.875% due 2033. The company is not burning cash, and the repurchase program is still running. But that leverage was taken on to buy earnings that barely appear in the trailing figures yet, so the ratio of borrowings to profit is measured against a base carrying only one quarter of the acquired operations. It will read differently once a full year is in there, in whichever direction the acquired economics turn out to run.

Catalysts

The defining event of Allison's 2026 has already happened. On January 2 the company closed its purchase of Dana Incorporated's off-highway drive and motion systems business for approximately $2.6 billion, the largest acquisition in its history, funded with cash on hand plus $500 million of 5.875% senior notes due December 2033. That moves the company's end markets past commercial trucks into agriculture, construction, mining and energy, and it means reported results now carry a segment that did not exist a year ago. Year-over-year comparisons through 2026 will not be clean, and the consolidated profitability of the combined group will not look like the transmission franchise's own.

The next scheduled information event is the second-quarter call on August 3, 2026. It carries more than routine weight because it reads on two questions at once. The first is whether North America on-highway volumes stabilized after a 14% year-over-year decline in the March quarter. The second is what the acquired operations actually contribute at the margin line now that a second quarter of them sits in the numbers. The direction of the top line is not in doubt, since management has said "In 2026, we expect to have higher net sales driven by the addition of Allison Off-Highway".

Two costs are already flagged for the year. The company anticipates "increased capital expenditures and cash income taxes in 2026 compared to 2025." and expects to "incur significant costs in connection with the integration of the Acquired Off-Highway Business." Neither is surprising after a deal this size. Both compete for the same cash that funds the repurchase program and services what was borrowed to do the deal.

Peer Cohorts (Per Segment, With Filing Citations)

Allison Transmission (consolidated) (reported)

• DCH (DAUCH CORPORATION)
• FY2025 10-K: …standard will have on our consolidated financial statements. Accounting Standards Update 2025-09 On November 25, 2025, the FASB issued ASU 2025-09 - Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. ASU 2025-09 amends existing cash flow hedge accounting requirements, allowing for the aggregation of…
• FY2025 10-K: …trustee (Incorporated by reference to Exhibit 4.3 of Registration Statement on Form S-3 dated July 12, 2011.) 4.03 Indenture, dated as of November 3, 2011, among American Axle & Manufacturing, Inc., the Guarantors and U.S. Bank National Association, as trustee (Incorporated by Reference to Exhibit 4.1 of Current…
• BWA (BORGWARNER INC)
• FY2025 10-K: …of related automotive components and systems. • Turbos & Thermal Technologies. This segment's products include turbochargers, eBoosters, eTurbos, emissions systems, thermal systems, gasoline ignition technology, smart remote actuators, powertrain sensors, cabin heaters, battery heaters and battery cooling systems. •…
• FY2025 10-K: …Consolidated Financial Statements. In connection with the Spin-Off, the Company entered into several agreements with PHINIA on or prior to the Distribution Date that, among other things, provide a framework for the Company's relationship with PHINIA after the Spin-Off, including a separation and distribution…
• PHIN (PHINIA INC.)
• FY2025 10-K: …equipment and vehicle diagnostics solutions. Additionally, we offer a diverse portfolio of original equipment service solutions and remanufactured products. The Aftermarket segment also includes sales of starters and alternators to OEMs. Financial Information About Reportable Segments Refer to Note 24, "Reportable…
• FY2025 10-K: …Methodology Key Assumptions Customer relationships $ 18 12 years Multi-period excess earnings Discount rate, customer attrition rate Patented and unpatented technology 9 6 years Relief-from-royalty Royalty rate, discount rate, obsolescence factor The purchase price, net of cash acquired, was allocated based on the…
• ATMU (Atmus Filtration Technologies Inc.)
• FY2025 10-K: …was paid during the period. All share repurchases were funded through available cash on hand. As of December 31, 2025, the Company had approximately $ 69.3 million in remaining share repurchase capacity. NOTE 17. RELATIONSHIP WITH RELATED PARTIES As described in Note 1, Description of the Business , Atmus had been…
• FY2025 10-K: …Non-cash settlements with Parent $ - $ - $ 29.4 Non-cash Capital expenditures - - ( 1.5 ) 55 Table of Contents ATMUS FILTRATION TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in millions of U.S. dollars) Common Stock Net Parent Investment Additional Paid-in Capital Retained Earnings…
• MOD (MODINE MANUFACTURING CO)
• FY2025 10-K: ONSOLIDATED FINANCIAL STATEMENTS (In millions, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended March 31, 2023 ​ Climate Performance Segment ​ ​ Solutions ​ Technologies ​ Total Product groups: ​ ​ ​ ​ Data center cooling ​ $ 173.8 ​ $ - ​ $ 173.8 Heat transfer ​ ​ 541.3 ​ ​ - ​ ​ 541.3 HVAC&R ​ 341.0 ​ -…
• FY2025 10-K: …position. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 86 Table of Contents MODINE MANUFACTURING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In millions, except per share amounts) ​ Note 21: Accumulated Other Comprehensive Loss Changes in accumulated other comprehensive loss were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​…
• GNTX (GENTEX CORPORATION)
• FY2025 10-K: …premium audio, aftermarket electronics, consumer electronic and accessory products; medical devices; and biometric products and technologies for the commercial and retail consumer electronics industries. The Company does not require collateral or other security for trade accounts receivable. Significant accounting…
• FY2025 10-K: …pursuant to applicable guidance, the Company recorded provisional liabilities for these matters based on preliminary estimates of their fair values as of the acquisition date. During the fourth quarter of 2025, one of the legal proceedings was settled for an amount less than the related provisional liability.…
• ALV (AUTOLIV, INC.)
• FY2025 10-K: …of December 31, 2025, see Note 15, Debt and Credit Agreements, to the Consolidated Financial Statements included herein. Operating lease obligations represent the payment obligations (undiscounted cash flows) under leases classified as operating leases. Capital lease obligations are not material. See Note 3, Leases,…
• FY2025 10-K: …any resulting translation adjustments are included in accumulated other comprehensive loss. The assets and liabilities of foreign subsidiaries whose local currency is not their functional currency are remeasured from their local currency to their functional currency and then translated to U.S. dollars. Revenues and…
• DORM (Dorman Products, Inc.)
• FY2025 10-K: …the motor vehicle aftermarket industry, serving passenger cars, light-, medium-, and heavy-duty trucks as well as specialty vehicles, including utility terrain vehicles ("UTVs") and all-terrain vehicles ("ATVs"). We operate through three business segments: Light Duty, Heavy Duty, and Specialty Vehicle, consistent…
• FY2025 10-K: …Consolidated Financial Statement Schedules. The following consolidated financial statement schedule of the Company and related documents are filed with this Annual Report on Form 10-K: Schedule II - Valuation and Qualifying Accounts. (a)(3) Exhibits. Reference is made to ITEM 15(b) below. (b) Exhibits . The Exhibit…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.