If You Like Cash Flow Machines Take A Look At ALLE
Here is why we think Allegion (ALLE) is worth a look
- Not many stocks offer free cash flow yield of 5.2%, but ALLE does
- 3-Year average revenue growth of 9.9% and operating margin of 19.8% show good fundamentals
- At PE of 20.0, this combo of cash yield, revenue growth, and margin could get noticed
- Compared to S&P, you get lower valuation, higher revenue growth, and better margins
Allegion manufactures and sells mechanical and electronic security products worldwide for commercial, institutional, and residential facilities.
| ALLE | S&P Median | |
|---|---|---|
| Sector | Industrials | – |
| Industry | Building Products | – |
| Free Cash Flow Yield | 5.2% | 3.9% |
| Revenue Growth LTM | 5.5% | 5.0% |
| Revenue Growth 3YAVG | 9.9% | 5.9% |
| Operating Margin LTM | 21.1% | 18.7% |
| Operating Margin 3YAVG | 19.8% | 17.3% |
| PE Ratio | 20.0 | 23.8 |
But do these numbers tell the full story? Read Buy or Sell ALLE Stock to see if Allegion still has an edge that holds up under the hood.
That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
The Point? The Market Can Notice, And Reward
Here are some stocks that showed strong cash flow yield in mid 2024, and saw strong returns in the subsequent 12 months
- FFIV gained 70% in a year after showing a 6.9% free cash flow yield
- CSCO had 6.6% yield, and returned 50% in the next 12 months
- PM rose over 85% percent as the market noticed its 5.7% free cash flow yield and good underlying revenue growth
But Consider The Risk
That said, ALLE isn’t immune to big drops. It fell about 19% in the 2018 correction, took a hit of over 43% during the Covid pandemic, and dropped nearly 39% in the inflation shock. Even with strong fundamentals, these dips show the stock can suffer major pullbacks when the market turns south. Good quality counts, but sharp sell-offs don’t leave many stocks untouched.
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read ALLE Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
Picking winners on a consistent basis is not an easy task – especially given the volatility associated with a single stock. Instead, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.