Allegion PLC (ALLE)

Conclusion

Allegion plc is an Irish-domiciled maker of security products, including locks, door controls, exit devices and access control systems, sold to commercial, institutional and residential customers under brands such as Schlage and Von Duprin. At 190.52 USD on 2026-11-09, the company has a market capitalisation of 16.2 billion USD and an enterprise value of 17.8 billion USD.

The verdict is fair. The trailing P/E of 23.4 sits 7.1% above its ten-year median of 21.9, while EV/EBITDA of 16.4 is 2.1% below its median of 16.7. The DCF gives 182.72 USD per share at a discount rate of 9.0%. The fair value band runs from 151.06 to 226.59 USD with a midpoint of 188.83 USD, a margin of safety of -0.9% at the current price. The fair value from historical multiples is 194.93 USD. The reverse DCF implies growth of 7.5% a year, against revenue growth of 8.4% a year over five years and free cash flow per share growth of 10.7% a year over the same period.

The strongest supports are ROIC of 20.8% against a WACC of 8.5%, an Altman Z-score of 5.11, and five-year free cash flow conversion of 96.4%. The weakest numbers are the price-to-sales multiple of 3.69, which is 11.7% above its ten-year median of 3.30, a Piotroski score of 6 out of 9, and a DCF in which the terminal value accounts for 57.4% of the result. If revenue growth slows well below the 7.5% the price implies, or margins fall back toward their medians, the current valuation would look stretched.

Financial health

Financial strength is green, supported by a current ratio of 1.90, net debt to EBITDA of 1.51, and interest coverage of 9.7 times. The quick ratio is 1.14 and debt to equity is 0.94, both within a comfortable range for an industrial business. The Altman Z-score is 5.11, which is in the safe zone. The Altman model was designed for manufacturers, and Allegion makes physical products, so the reading applies reasonably well. Insolvency risk is low, with an estimated probability of about 0.7% over one to two years by the Ohlson model, based on the 2025 annual statements. The company's balance sheet does not appear to present a near-term solvency concern on these measures.

Earnings quality

Earnings quality is green. Free cash flow conversion is 106.9% on a trailing basis and 96.4% over five years, and the accrual ratio of -2.9% suggests cash generation keeps pace with reported earnings. Stock-based compensation is 0.7% of revenue, and free cash flow after it is 709.2 million USD. The share count fell at a compound rate of 1.4% over five years, which points to net buybacks. The Piotroski score is 6 out of 9. The Beneish M-score is not available. Allegion beat earnings estimates in six of the last eight quarters, with an average surprise of 3.4%. Analysts have raised estimates for the current year and next year over the last 90 days, with no downward revisions in the last 30 days.

Profitability

Profitability is green. Gross margin is 45.1% against a ten-year median of 43.6%, operating margin is 21.5% against 19.4%, and net margin is 15.7% against 14.4%. Operating margin stability is 8.9%. ROIC is 20.8% against a WACC of 8.5%, and the given ROIC minus WACC value is 12.4%, labelled as creating value. The five-year median ROIC is 20.8%, so returns have held steady. Return on equity is 31.8%. The DuPont split shows a net margin of 15.8%, an asset turnover of 0.78 and an equity multiplier of 2.53. Much of the high return on equity therefore comes from operating returns, with leverage adding a meaningful but secondary contribution.

Growth

Growth is green. Revenue grew at a compound rate of 7.5% over three years, 8.4% over five years and 7.0% over ten years. Revenue rose in nine of the last ten comparable years. Earnings per share grew at 12.8% over three years, 17.1% over five years and 16.7% over ten years. Free cash flow per share grew at 21.0% over three years, 10.7% over five years and 13.2% over ten years. Consensus expects earnings per share to grow 11.5% next year, which is faster than the long-run revenue trend.

Valuation

Valuation is yellow, with the verdict neutral at a margin of safety of -0.9%. Against ten-year medians, P/E is 23.4 against 21.9 (a premium of 7.1%), EV/EBITDA is 16.4 against 16.7 (a discount of 2.1%), price to free cash flow is 21.9 against 22.8 (a discount of 3.8%), price to sales is 3.69 against 3.30 (a premium of 11.7%), and price to book is 7.5 against 12.6 (a discount of 40.9%). The DCF gives 182.72 USD per share, using a discount rate of 9.0%, a 2.5% terminal growth rate and an 8.4% near-term growth rate. Its terminal value is 57.4% of the total, so the result depends heavily on long-run assumptions. The free cash flow yield is 4.6% and the dividend yield is 1.1%, with a payout of 24.8% of free cash flow. The fair value is an estimate built on fixed assumptions, not a price target.

Risks

The main risk is valuation. If the reverse DCF's 7.5% implied growth is not sustained, the stock could move toward the lower part of the fair value band of 151.06 USD. Price to sales at a premium of 11.7% and a P/E premium of 7.1% leave less room for error. A Piotroski score of 6 out of 9 is respectable but not strong, so any weakening in cash flow or profitability would reduce the quality signal. The DCF depends on the terminal value for 57.4% of its result, so changes in long-term growth or the discount rate would move the outcome sharply. The Beneish M-score is not available, so manipulation risk cannot be checked on this basis. This analysis has no debt maturity schedule and no breakdown of revenue by segment, so refinancing risk and the mix between Americas and International cannot be assessed.