Stock Analysis

Should You Investigate Allegion plc (NYSE:ALLE) At US$131?

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NYSE:ALLE
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Allegion plc (NYSE:ALLE) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$148 at one point, and dropping to the lows of US$123. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Allegion's current trading price of US$131 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Allegion’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Allegion

What's the opportunity in Allegion?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 10.32% above my intrinsic value, which means if you buy Allegion today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $118.64, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Allegion’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Allegion look like?

earnings-and-revenue-growth
NYSE:ALLE Earnings and Revenue Growth December 10th 2021

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 32% over the next couple of years, the future seems bright for Allegion. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in ALLE’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on ALLE, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Allegion has 2 warning signs and it would be unwise to ignore them.

If you are no longer interested in Allegion, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

What are the risks and opportunities for Allegion?

Allegion plc manufactures and sells mechanical and electronic security products and solutions worldwide.

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Rewards

  • Earnings are forecast to grow 10.73% per year

Risks

  • Debt is not well covered by operating cash flow

  • Significant insider selling over the past 3 months

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