Value
7.3/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.1 |
| P/S | 8.5 |
| EV/EBITDA | 4.5 |
| Fwd P/E | 9.2 |
| PEG | 8.9 |
| Analyst target | 5.0 |
- ▸Forward P/E: 10.3x
- ▸PEG: 0.69
- ▸Attractively valued
ALSN · Why this verdict
Why Allison Transmission Holdings, (ALSN) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.8/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The three most recent quarters all missed consensus EPS estimates, with the most recent delivering a 34.5% shortfall versus expectations; only the oldest quarter in the four-period window managed a beat, signaling a meaningful deterioration in earnings predictability. Earnings | At least two of the next three quarters beat EPS estimates, signaling a return to the execution quality that the oldest quarter in the current window once reflected. | →Stable |
| CounterA series of misses driven by cyclical demand or input cost timing can reverse sharply as those factors normalize; if the shortfalls reflect lumpy one-time items rather than structural margin compression, the recent run may overstate the underlying deterioration. | ||
Approximately 76% of revenue is generated in North America, and the five largest OEM customers account for more than half of total sales — leaving the business unusually exposed to a regional slowdown or the renegotiation or loss of a key customer relationship. Bear case | Non-North-American revenue grows to represent more than 30% of total over the next two years, meaningfully reducing geographic concentration. | →Stable |
| CounterA dominant North American market share can reflect genuine competitive advantage rather than a lack of diversification; deep integration with major OEM customers may represent a switching-cost moat rather than a vulnerability. | ||
Free cash flow represents only 7% of reported net income — a deeply concerning gap suggesting that the vast majority of accounting earnings are not converting into distributable cash, raising questions about whether the dividend payout is genuinely covered by operating cash generation. Quality breakdown | FCF as a percentage of net income rises above 50% within four quarters as capital expenditure or working capital dynamics normalize, demonstrating that the earnings are not illusory. | →Stable |
| CounterA temporary FCF-to-net-income gap can arise from elevated capital investment cycles or working capital timing; if the gap closes as capex normalizes, the apparent cash quality concern may prove transient rather than structural. | ||
The stock has reached the analyst consensus price target, leaving essentially no headroom at current levels; with the risk/reward unfavorable at this price and earnings execution deteriorating, the setup does not support adding new exposure. Warnings | Analyst consensus price target rises more than 15% above current price within six months, driven by upward earnings revisions that restore a meaningful margin of safety. | →Stable |
| CounterA stock at its analyst price target can continue to appreciate if fundamentals improve faster than the consensus anticipates; the target ceiling is a snapshot, not a ceiling, and a return to earnings beats could prompt rapid target upgrades. | ||
The three most recent quarters all missed consensus EPS estimates, with the most recent delivering a 34.5% shortfall versus expectations; only the oldest quarter in the four-period window managed a beat, signaling a meaningful deterioration in earnings predictability.
→StableEarnings
- Expectation
- At least two of the next three quarters beat EPS estimates, signaling a return to the execution quality that the oldest quarter in the current window once reflected.
CounterA series of misses driven by cyclical demand or input cost timing can reverse sharply as those factors normalize; if the shortfalls reflect lumpy one-time items rather than structural margin compression, the recent run may overstate the underlying deterioration.
Approximately 76% of revenue is generated in North America, and the five largest OEM customers account for more than half of total sales — leaving the business unusually exposed to a regional slowdown or the renegotiation or loss of a key customer relationship.
→StableBear case
- Expectation
- Non-North-American revenue grows to represent more than 30% of total over the next two years, meaningfully reducing geographic concentration.
CounterA dominant North American market share can reflect genuine competitive advantage rather than a lack of diversification; deep integration with major OEM customers may represent a switching-cost moat rather than a vulnerability.
Free cash flow represents only 7% of reported net income — a deeply concerning gap suggesting that the vast majority of accounting earnings are not converting into distributable cash, raising questions about whether the dividend payout is genuinely covered by operating cash generation.
→StableQuality breakdown
- Expectation
- FCF as a percentage of net income rises above 50% within four quarters as capital expenditure or working capital dynamics normalize, demonstrating that the earnings are not illusory.
CounterA temporary FCF-to-net-income gap can arise from elevated capital investment cycles or working capital timing; if the gap closes as capex normalizes, the apparent cash quality concern may prove transient rather than structural.
The stock has reached the analyst consensus price target, leaving essentially no headroom at current levels; with the risk/reward unfavorable at this price and earnings execution deteriorating, the setup does not support adding new exposure.
→StableWarnings
- Expectation
- Analyst consensus price target rises more than 15% above current price within six months, driven by upward earnings revisions that restore a meaningful margin of safety.
CounterA stock at its analyst price target can continue to appreciate if fundamentals improve faster than the consensus anticipates; the target ceiling is a snapshot, not a ceiling, and a return to earnings beats could prompt rapid target upgrades.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Allison Transmission's valuation appears attractive in isolation, but three consecutive earnings misses including a 34.5% shortfall in the most recent quarter, free cash flow representing only 7% of reported net income, and heavy geographic and customer concentration collectively undermine confidence in the earnings base and leave no compelling case for adding exposure at current levels where the stock has reached the analyst price target.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 5.5 |
| Gross margin | 4.5 |
| Op margin | 7.8 |
| Net margin | 7.4 |
| Current ratio | 6.5 |
| FCF quality | 0.6 |
| Moat | 6.8 |
| Piotroski F | 7.8 |
- ▸Excellent ROE: 30%
- ▸Earnings quality RED FLAG: 7% FCF/NI
- ▸Strong Piotroski F-Score: 7/9
Growth
5.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 10.0 |
| EPS growth | 0.0 |
- ▸Strong growth: 84% YoY
Momentum
4.3/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 4.0 |
| Volume | 10.0 |
| vol acceleration | 5.5 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 8.5 |
| Analyst rating | 5.0 |
| Price target | 7.5 |
- ▸LLM news sentiment: +0.70 (n=2)
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Negligible insider selling — $283,750 (0.003% of mkt cap)
Peer rank
5.7/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.2 |
| quality rank | 9.4 |
| growth rank | 9.4 |
- ▸Superior ROE vs peers
- ▸Best-in-class margins
Technical
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 6.3 |
| support resistance | 6.3 |
| 52w position | 7.0 |
Risk (lower is worse)
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.4 |
| days to cover | 7.5 |
| volatility | 2.7 |
| put call | 5.0 |
| implied vol | 4.9 |
| beta | 7.3 |
| debt equity | 2.7 |
| news risk | 5.5 |
- ▸Concentration risks: 3 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
4.8/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 4.5 |
| dividend safety | 5.2 |
| news activity | 6.0 |
- ▸Earnings concerns: 2B/2M
- ▸Dividend: 100.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (5)
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:32d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:4.3<4.5
- ASYMMETRY:0.3<1.5@spot
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
0.35
Upside
+2.7%
Downside
7.9%
Sizing output
AVOID
SetupRange Bound — RSI 51 mid-range, Bollinger mid-band
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 4.3 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 7.3) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:4.3<4.5, ASYMMETRY:0.3<1.5@spot) reinforce the read. Current asymmetry R:R is 0.35 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 7.3, Sentiment at 6.9, and Technical at 6.5; the weakest are Momentum at 4.3, Catalyst at 4.8, and Insider at 5.0. The V9 engine flagged 2 failed gates with 1 warning, producing an asymmetric reward-to-risk of 0.35 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Three Consecutive Earnings Misses
Trip ifEPS surprise exceeds 0% in 2 or more of the next 3 reported quarters, signaling a return to execution.
- P2Geographic Customer Concentration
Trip ifNorth American revenue falls below 65% of total for 2 consecutive annual reporting periods.
- P3Fcf Conversion Failure Dividend Risk
Trip ifFCF as a percentage of net income rises above 50% for 2 consecutive quarters.
- P4Price At Target No Remaining Upside
Trip ifConsensus analyst price target rises more than 15% above current price within 6 months, restoring positive asymmetry.