Allegion (ALLE): Evaluating Valuation After Strong Q2 Growth and Upgraded Earnings Outlook

Allegion (ALLE) reported Q2 revenue growth compared to last year, with results coming in higher than expected and the company raising its outlook for full-year earnings. The positive results sent the stock higher and caught the attention of investors.

See our latest analysis for Allegion.

Momentum has been building for Allegion following upbeat Q2 results and its recent launch of the Schlage Performance Series Locks. The stock has gained notable traction thanks to a stronger earnings outlook and management’s drive to address customer needs in a challenging commercial real estate landscape. Over the past year, total shareholder return sits at 23.2%, reinforcing long-term confidence among investors even as the latest share price hovers near $177.29.

If positive updates in building products have you broadening your search, now’s the perfect time to explore fast growing stocks with high insider ownership.

With the stock trading just shy of analyst targets and fresh momentum from new products and guidance upgrades, investors have to ask whether Allegion is undervalued at current levels or if markets have already factored in its future growth.

Most Popular Narrative: Fairly Valued

With Allegion’s fair value narrative almost perfectly matching its closing share price, investors have a clear line between expectation and market reality. This raises the stakes for which side will move next: analyst forecasts or market sentiment.

Strategic investments in electronic/software acquisitions (ELATEC, Gatewise, Waitwhile) are expected to drive new recurring revenue streams and margin accretion starting in 2026, enhancing both top-line growth and net margin profile as SaaS and high-margin hardware gain share of the portfolio.

Read the complete narrative.

Want to know the engine behind these projections? The narrative hinges on a specific mix of future growth, profitability gains, and a profit multiple that may surprise you. Curious about the underlying math and how much confidence is riding on Allegion's digital transformation? See the full narrative for the financial numbers behind this market verdict.

Result: Fair Value of $177.55 (ABOUT RIGHT)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sustained weakness in international markets or setbacks in integrating new acquisitions could present challenges to Allegion’s growth prospects and disrupt current valuation assumptions.

Find out about the key risks to this Allegion narrative.

Another View: What Do Multiples Say?

Looking at Allegion's price-to-earnings ratio of 24.3x, the stock appears more expensive than both its industry average of 22.4x and its peers at 18.9x. Notably, this figure is also higher than the so-called fair ratio of 22.2x. Could this premium mean investors are overestimating future returns, or is there more value to be unlocked?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Allegion Narrative

If you see the numbers differently or want to dig into the data on your own terms, you can easily build your own story in just a few minutes. Do it your way.

A great starting point for your Allegion research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

Smart investors like you stay ahead by tapping into new trends before the crowd and finding stocks that fit their personal goals. Don’t let unique opportunities pass you by, as the best ideas are often right at your fingertips.

• Uncover growth stories before they go mainstream by checking out these 887 undervalued stocks based on cash flows, which offers strong long-term potential and attractive price points.
• Boost your portfolio’s income with these 19 dividend stocks with yields > 3%, providing reliable yields above 3% for those looking to lock in solid returns.
• Capitalize on cutting-edge breakthroughs in digital health by searching these 32 healthcare AI stocks, which features companies at the forefront of innovation in medical technology.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com