- Wondering if Allegion at around US$144.66 is offering fair value or a margin of safety right now? This article walks through the key valuation signals that can help you decide.
- The stock has seen a 1.4% decline over the last 7 days and a 19.4% decline over the last 30 days, even though the 1 year return sits at 14.0% and the 3 year return at 45.5%.
- These moves come as Allegion continues to feature in broader discussions around building products and security solutions, which keeps it on the radar of both growth focused and income focused investors. With the share price pulling back recently while longer term returns remain positive, many readers are reassessing what a reasonable valuation range might look like.
- On Simply Wall St's valuation checks, Allegion currently holds a 5 out of 6 valuation score. The next sections break down the main valuation methods used, then finish with a way to think about valuation that goes beyond any single model.
Approach 1: Allegion Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model estimates what a business could be worth today by projecting its future cash flows and then discounting those back to a single present value figure.
For Allegion, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flows in $. The latest twelve month free cash flow sits at about $686.7 million. Analyst and extrapolated projections in the model show annual free cash flow values between $693.2 million and $1,021.9 million over the next decade, with 2030 specifically projected at $856 million. Beyond the first five years, Simply Wall St extrapolates the figures rather than relying on additional analyst estimates.
After discounting all those projected cash flows back to today, the model arrives at an estimated intrinsic value of about $144.67 per share. With the current share price around $144.66, the implied discount is effectively 0.0%, which points to Allegion trading very close to this DCF estimate.
Result: ABOUT RIGHT
Allegion is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.
Approach 2: Allegion Price vs Earnings
For profitable companies, the P/E ratio is a useful shorthand because it links what you pay for each share to the earnings that business is currently generating. It helps you see how much the market is willing to pay for every dollar of earnings.
What counts as a “normal” or “fair” P/E depends on how investors see growth and risk. Higher expected growth or lower perceived risk can justify a higher multiple, while slower growth or higher uncertainty usually point to a lower one.
Allegion currently trades on a P/E of 19.36x. That sits just below the Building industry average of 20.21x and well below the peer group average of 41.04x. Simply Wall St’s Fair Ratio for Allegion is 22.92x, which is its proprietary view of what a reasonable P/E might be after considering factors such as earnings growth, profit margins, industry, market cap and company specific risks.
This Fair Ratio can be more informative than a simple peer or industry comparison because it adjusts for those company characteristics rather than relying on broad group averages. With Allegion’s actual P/E below the 22.92x Fair Ratio, the shares screen as undervalued on this metric.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Allegion Narrative
Earlier it was mentioned that there is an even better way to understand valuation, and Narratives bring this to life by letting you connect your view of Allegion’s story to a financial forecast, a fair value, and finally a comparison with the current share price. All of this is available within an easy tool on Simply Wall St’s Community page that millions of investors use to set their own assumptions for future revenue, earnings and margins, see how those inputs translate into fair values that update automatically when fresh news or earnings arrive, and compare very different viewpoints. For example, a more optimistic Allegion Narrative might be built around recurring IoT and software driven security demand that supports a fair value closer to about US$180 per share. In contrast, a more cautious Allegion Narrative might lean on lower growth, more pressure in the Americas and less confidence in acquisitions, which might leave the user comfortable with a fair value nearer to the current price. This helps each investor decide for themselves whether Allegion looks more like a buy, a hold, or a potential trim based on their own story, not just a single model output.
Do you think there's more to the story for Allegion? Head over to our Community to see what others are saying!
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.
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