Should You Investigate Allison Transmission Holdings, Inc. (NYSE:ALSN) At US$89.20?

Allison Transmission Holdings, Inc. (NYSE:ALSN), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$106 at one point, and dropping to the lows of US$85.58. 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 Allison Transmission Holdings' current trading price of US$89.20 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Allison Transmission Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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What's The Opportunity In Allison Transmission Holdings?

Great news for investors – Allison Transmission Holdings is still trading at a fairly cheap price according to our price multiple model, where we compare 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 9.79x is below its peer average of 24.61x, which indicates the stock is trading at a lower price compared to the Machinery industry. Allison Transmission Holdings’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

See our latest analysis for Allison Transmission Holdings

Can we expect growth from Allison Transmission Holdings?

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 3.0% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Allison Transmission Holdings, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since ALSN is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure 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 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. Every company has risks, and we've spotted 1 warning sign for Allison Transmission Holdings you should know about.

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.