ALLISON TRANSMISSION HOLDINGS, INC. (ALSN): what the price requires
At today's price, ALLISON TRANSMISSION HOLDINGS, INC. (ALSN) is priced for -2.6% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/ALSN
Headline
| Field | Value |
|---|---|
| Ticker | ALSN |
| Company | ALLISON TRANSMISSION HOLDINGS, INC. |
| Current price | $115.76/sh |
| Composition | North America On-Highway 51% / Outside North America On-Highway 17% / Global Off-Highway 2% / Defense 9% / Service Parts, Support Equipment and Other 21% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 8.6% |
| Operating margin today | 24.6% |
| Margin compression implied | -16.0pp |
| Implied growth | -2.6% |
| Multiple paid | 15x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 7.7% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.4pp.
Reconcile: at the x-ray's 9.3% required return this reads ~6.9%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.74σ |
| cohort percentile (of 212 peers) | 33 |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.66x | 5 | expensive |
| Earnings | 2.80x | 4 | expensive |
| Relative | 1.13x | 3 | expensive |
| Growth | 0.63x | 3 | justifies |
Families that justify the price: Relative, 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 7.7%); the inversion above states its own rate.
Per-Model Detail (n=15)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $264.19 | 0.44x | yes | FCF base $0.7B, growth 15% (input: historical growth), terminal g 4.0%, WACC 7.7%, 6yr projection |
| DCF Exit Multiple | Growth | $183.81 | 0.63x | yes | Exit EV/EBITDA: 12.1x / 14.1x / 16.1x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $125.59 | 0.92x | yes | P/E 20x (static sector reference · 2026-04), scenarios: 16.4x / 20.0x / 23.6x (bear / base = reference held flat / bull), EV/EBITDA 13x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $69.88 | 1.66x | yes | BV/sh $22.65, ROE (TTM) 28.5%, ke 9.3% |
| Two-Stage Excess Return | Asset | $125.58 | 0.92x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $114.01 | 1.02x | yes | Rev $3.6B, growth 15% (input: historical growth; tapered), Terminal P/S: 2.2x / 2.7x / 3.1x (bear / base = today's held flat / bull, cap 12x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $63.78 | 1.81x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.85B × (1−15%) / WACC 7.7% → EPV (no growth) |
| Residual Income | Asset | $105.72 | 1.09x | yes | BV $22.65 + 5yr PV of (ROE (TTM) 28.5% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $57.25 | 2.02x | yes | √(22.5 × EPS $6.43 × BVPS $22.65) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $102.57 | 1.13x | yes | EBITDA $0.97B × sector EV/EBITDA 13.0x |
| FCF Yield | Earnings | $30.52 | 3.79x | yes | FCF $609.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $26.92 | 4.30x | yes | SBC-adj FCF $0.58B (FCF $0.61B − SBC $0.03B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $5.39 | 21.48x | yes | EPS $6.43 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $8.21 | 14.10x | yes | BV $22.65 × (ROIC 2.8% / WACC 7.7%) |
| P/Sales Sector | Relative | $65.18 | 1.78x | yes | Revenue $3.65B × sector P/S 1.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $69.51 | 1.67x | yes | EPS $6.43 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $4.0b |
| Net debt / NOPAT (after-tax) | 5.24x |
| Net debt / operating income (pre-tax) | 4.45x |
| Share count CAGR (buyback) | -4.0% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- Allison makes the fully automatic transmissions that go into commercial trucks, buses, and defense vehicles, and it does it at a roughly 22% operating margin with a return on equity near 29%, which is the economics of a dominant supplier rather than a typical parts maker.
- This is a mature, cash-rich franchise being run for cash returns: the share count has fallen about 4% a year on steady buybacks, on top of a quarterly dividend, so per-share value rises even when volumes are flat.
- The defining long-term risk is the powertrain itself: if commercial trucking electrifies, the transmission Allison sells can be designed out, so the EV transition and the emissions and tariff rules around it are the variables that matter most over a long horizon.
Bull Case
Allison is a mature business, and reading it correctly starts with accepting that. This is not a company that will double its volumes; it is a dominant incumbent in a slow-growing market, and the right question is not how fast it grows but how durably it converts a stable franchise into cash. On that frame it is exceptional. It runs a roughly 22% operating margin and a return on equity near 29% on the strength of a near-monopoly position in fully automatic transmissions for medium- and heavy-duty commercial vehicles, where its main competition is fragmented and regional. The brand is the moat: Allison even "license[s] the 'Allison Transmission' name" to others, which is what a company does when its name itself carries pricing power.
For a mature company, capital allocation is where most of the shareholder return is made, and Allison treats it that way. It generates strong free cash flow, near $609 million on a trailing basis, and it returns the bulk of it. The share count has fallen about 4% a year on consistent buybacks, and the company declared a quarterly dividend of $0.29 alongside. Retiring 4% of the shares annually means a holder's claim on the same earnings grows every year without the business growing at all, which is precisely how a no-growth franchise still compounds per-share value. That is the mature-company playbook executed well.
The recent move that reshapes the story is the Allison Off-Highway acquisition, which broadens the franchise beyond on-highway trucks. The filing describes the deal as adding "an expanded portfolio of drivetrain, motion and propulsion solutions, providing complementary product breadth" across end markets, including off-highway equipment that the company notes "served end markets with demand characteristics that differ from our" core. Management expects it to be accretive to net income and earnings per share in 2026 even after more than $100 million of one-time integration costs. For a mature company, buying adjacent, diversifying cash flows at an accretive price is the rational use of a strong balance sheet, and it extends the franchise into markets less exposed to a single truck cycle.
Bear Case
The macro and regulatory exposure is the bear case for Allison, and it operates on two timescales. The near-term one is the truck cycle and the policy noise around it. The legacy North America on-highway business, the company's core, saw first-quarter net sales of $733 million, down 4% year over year, and management framed the market with cautious optimism amid uncertainty over "geopolitical impacts including tariffs and final rulings on emissions regulations". Commercial-truck demand is cyclical and tied to freight, rates, and the timing of fleet replacement, and tariffs on inputs or vehicles plus shifting emissions deadlines can pull or push a buy cycle in ways Allison does not control. A high-fixed-cost manufacturer feels a volume dip more than its size suggests.
The long-term exposure is existential in a way few mature industrials face: the product Allison sells exists because trucks burn fuel and shift gears, and electrification threatens to remove the transmission entirely. The company names the risk directly, listing among its uncertainties its ability to respond to "technological and market developments, competitive threats and changing customer needs, including with respect to electric hybrid and fully electric commercial" vehicles, and it cautions that new electrified products move at the pace of "fleet buy cycles" with "no guarantee of future" adoption. An electric commercial vehicle does not need a multi-speed automatic transmission of the kind that built Allison's margins. The transition is slow in heavy trucking, which is the bull's reprieve, but the direction of travel is a structural threat to the core franchise, not a passing cyclical one.
The balance sheet sharpens the stakes rather than softening them. Allison carries net debt near $4 billion, at roughly five times operating income, which is meaningful leverage for a company exposed to a cyclical end market and a long-term technology shift. The aggressive buyback that drives the per-share story is funded against that leverage, so a deep truck downturn would pressure both the cash flow and the capacity to keep retiring shares. The valuation reflects some of this caution already: the price requires very little, an implied operating margin around 9% against the roughly 22% the company earns today, which is the market pricing the franchise as if margins and volumes erode materially over time. The bear case is that the erosion is real and directional, driven by the cycle in the near term and electrification in the long term, and a levered balance sheet leaves less room to absorb it.
Valuation
Allison is priced as a mature franchise with low expectations baked in, and the inversion makes that vivid. To justify today's $119.10 (June 27, 2026), the price requires an operating margin of only about 9%, well below the roughly 22% the company earns now, paired with revenue that essentially does not grow. In plain terms, the market is pricing Allison as if its margins compress by more than half and its volumes stay flat or shrink. That is a low bar, and it is the opposite of a growth premium: it is the market discounting the franchise for the cyclical and electrification risks the bear case names. A company clearing a far higher margin than its price requires is, on the math alone, not expensively valued.
The methods we use to triangulate confirm the split. The forward-growth lenses see the stock as clearly cheap, with a perpetual-growth cash-flow read near $262 and an exit-multiple read near $187, both well above the price. The peer-multiple lens lands near the price, around $126 on a sector earnings multiple. Only the static asset and earnings-power lenses sit below, with an earnings-power value near $63 and a free-cash-flow capitalization near $31, because those methods assume zero growth and credit nothing for the franchise's durability. The pattern is that of a mature cash machine: the growth methods say cheap because they project the cash continuing, the static methods say expensive because they assume it stops, and the truth depends on how long the franchise holds against electrification. The price sits closer to the static, cautious end, which is the market siding partly with the bear.
Solvency is where the buyer has to weigh the leverage against the cash generation. Allison carries net debt near $4 billion, roughly five times operating income, which is real leverage and the one genuine constraint on the otherwise-pristine cash story. The offset is the cash flow itself: strong and stable free cash flow funds both the debt service and the buyback that shrinks the share count about 4% a year. In a normal cycle that combination is comfortable; in a sharp downturn the leverage would force a choice between debt reduction and capital return. The valuation does not assume heroics, which is its appeal, but the balance sheet means the cyclical and structural risks the price discounts are not purely academic. The decisive judgment is how durable the transmission franchise proves to be, and the price has already taken a cautious view of it.
Catalysts
Allison's first quarter of 2026 was reshaped by the Off-Highway acquisition. Reported sales jumped 83.6% year over year to $1,406 million, beating estimates, but most of that increase was the acquired business; the legacy North America on-highway core declined 4% to $733 million. The bottom line carried the cost of the deal: GAAP earnings per share of $1.33 came in well below consensus, weighed down by separation and restructuring expenses, while company-adjusted diluted earnings per share were $2.57, and net income fell to $112 million from $192 million.
The forward setup is steady but cautious. Management reaffirmed full-year 2026 net income guidance of $600 million to $750 million, including the separation and restructuring costs, and pointed to full-year revenue around $5.75 billion. It expects the Off-Highway acquisition to be accretive to net income and earnings per share in 2026 even after more than $100 million of one-time costs, and it continued its buyback and declared a $0.29 quarterly dividend. The next earnings prints turn on two readings: whether the legacy truck market firms as order trends suggested it might, and how cleanly the acquisition integrates, since the accretion case depends on the one-time costs staying contained.
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.
- 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.
Sources
Q1 FY2026 earnings release · Q1 FY2026 earnings call