Does Allegion (NYSE:ALLE) Deserve A Spot On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Allegion (NYSE:ALLE). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Allegion

Allegion's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. We can see that in the last three years Allegion grew its EPS by 8.8% per year. That's a good rate of growth, if it can be sustained.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Allegion maintained stable EBIT margins over the last year, all while growing revenue 3.3% to US$3.8b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Allegion's forecast profits?

Are Allegion Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The US$1.4m worth of shares that insiders sold during the last 12 months pales in comparison to the US$2.9m they spent on acquiring shares in the company. We find this encouraging because it suggests they are optimistic about Allegion'sfuture. Zooming in, we can see that the biggest insider purchase was by President John Stone for US$1.1m worth of shares, at about US$141 per share.

Along with the insider buying, another encouraging sign for Allegion is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at US$30m. This considerable investment should help drive long-term value in the business. Even though that's only about 0.3% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Allegion's CEO, John Stone, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations over US$8.0b, like Allegion, the median CEO pay is around US$13m.

Allegion's CEO took home a total compensation package worth US$9.0m in the year leading up to December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Allegion To Your Watchlist?

As previously touched on, Allegion is a growing business, which is encouraging. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. You should always think about risks though. Case in point, we've spotted 1 warning sign for Allegion you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Allegion isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by high insider ownership.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.