What Is Allison Transmission Holdings, Inc.'s (NYSE:ALSN) Share Price Doing?

Allison Transmission Holdings, Inc. (NYSE:ALSN), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. The recent jump in the share price has meant that the company is trading at close to its 52-week high. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Allison Transmission Holdings’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Allison Transmission Holdings

What's The Opportunity In Allison Transmission Holdings?

Good news, investors! Allison Transmission Holdings is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Allison Transmission Holdings’s ratio of 10.03x is below its peer average of 23.18x, which indicates the stock is trading at a lower price compared to the Machinery industry. What’s more interesting is that, Allison Transmission Holdings’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Allison Transmission Holdings?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 a double-digit 10% over the next couple of years, the outlook is positive for Allison Transmission Holdings. 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? Since ALSN is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on ALSN for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ALSN. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

If you want to dive deeper into Allison Transmission Holdings, you'd also look into what risks it is currently facing. For example - Allison Transmission Holdings has 2 warning signs we think you should be aware of.

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

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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.