Value
5.0/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 5.5 |
| P/S | 7.9 |
| EV/EBITDA | 2.4 |
| Fwd P/E | 6.9 |
| PEG | 4.4 |
| Analyst target | 3.0 |
- ▸Forward P/E: 18.4x
- ▸PEG: 2.10
ALLE · Why this verdict
Why Allegion (ALLE) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results. How we score · Editorial policy
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VerdictSELL
Overall score5.8/10
ConfidenceMEDIUM
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
A high-quality industrial franchise with a 34% return on equity and a Piotroski F-Score of 7 out of 9 is navigating a challenging transition: two consecutive recent earnings misses, modest growth, and a leverage burden have combined to push the stock below its long-term trend line, while improving momentum indicators and meaningful analyst upside suggest the recovery setup is forming but not yet confirmed.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The business delivers a 34% return on equity, 15% operating margins, and a Piotroski F-Score of 7 out of 9 — placing it in the upper tier of quality among industrial peers and providing a durable earnings floor from which to recover. Quality breakdown | Return on equity sustains above 25% and the Piotroski score remains at 7 or above over the next four quarters. | ↑Improving |
| CounterFree cash flow converts at only 78% of net income, below full conversion, and a debt-to-equity ratio of 1.1 introduces a leverage burden that diminishes overall balance sheet quality and leaves less financial flexibility if earnings soften further. | ||
Revenue growth is modest and earnings growth is essentially flat, while a debt-to-equity ratio of 1.1 reduces financial flexibility — a combination that leaves limited margin for error if the macroeconomic environment softens or interest costs rise. Components | Revenue growth accelerates above 8% year-over-year for 2 consecutive quarters as the organic demand environment improves. | ↑Improving |
| CounterModerate leverage is common in cash-generative industrial businesses, and the Piotroski score of 7/9 suggests the balance sheet is not under stress; the risk is manageable if free cash flow converts reliably and capex requirements remain controlled. | ||
After two consecutive beats in the prior year, the company missed consensus estimates in both of the two most recent quarters — by approximately 5% in the most recent print and by 2% the quarter prior — signaling a deterioration in execution or a more challenging operating environment that has not yet been fully reflected in forward estimates. Bear case | EPS beats resume for 2 consecutive quarters with positive surprises above 3%. | ↑Improving |
| CounterBoth recent misses were modest in absolute terms (under 6%), and the underlying beat-then-miss pattern may reflect a temporary guidance reset rather than structural deterioration; the prior two-quarter beat streak suggests the business can return to outperformance. | ||
Despite trading below the 200-day moving average in a prior downtrend, MACD has turned bullish, OBV is rising, and momentum has recovered to 6.0 — suggesting the initial conditions for a technical recovery are forming, with 23% analyst upside providing a potential destination if the fundamental picture stabilizes. Momentum breakdown | Price crosses back above the 200-day moving average and the momentum score rises above 7.0 within 6 months. | ↓Deteriorating |
| CounterA death cross pattern remains a concern, and the 200-day MA slope is still declining at approximately 3% per month; momentum could re-deteriorate on the next earnings miss, and the technical pattern resolves only on confirmed follow-through. | ||
The business delivers a 34% return on equity, 15% operating margins, and a Piotroski F-Score of 7 out of 9 — placing it in the upper tier of quality among industrial peers and providing a durable earnings floor from which to recover.
↑ImprovingQuality breakdown
- Expectation
- Return on equity sustains above 25% and the Piotroski score remains at 7 or above over the next four quarters.
CounterFree cash flow converts at only 78% of net income, below full conversion, and a debt-to-equity ratio of 1.1 introduces a leverage burden that diminishes overall balance sheet quality and leaves less financial flexibility if earnings soften further.
Revenue growth is modest and earnings growth is essentially flat, while a debt-to-equity ratio of 1.1 reduces financial flexibility — a combination that leaves limited margin for error if the macroeconomic environment softens or interest costs rise.
↑ImprovingComponents
- Expectation
- Revenue growth accelerates above 8% year-over-year for 2 consecutive quarters as the organic demand environment improves.
CounterModerate leverage is common in cash-generative industrial businesses, and the Piotroski score of 7/9 suggests the balance sheet is not under stress; the risk is manageable if free cash flow converts reliably and capex requirements remain controlled.
After two consecutive beats in the prior year, the company missed consensus estimates in both of the two most recent quarters — by approximately 5% in the most recent print and by 2% the quarter prior — signaling a deterioration in execution or a more challenging operating environment that has not yet been fully reflected in forward estimates.
↑ImprovingBear case
- Expectation
- EPS beats resume for 2 consecutive quarters with positive surprises above 3%.
CounterBoth recent misses were modest in absolute terms (under 6%), and the underlying beat-then-miss pattern may reflect a temporary guidance reset rather than structural deterioration; the prior two-quarter beat streak suggests the business can return to outperformance.
Despite trading below the 200-day moving average in a prior downtrend, MACD has turned bullish, OBV is rising, and momentum has recovered to 6.0 — suggesting the initial conditions for a technical recovery are forming, with 23% analyst upside providing a potential destination if the fundamental picture stabilizes.
↓DeterioratingMomentum breakdown
- Expectation
- Price crosses back above the 200-day moving average and the momentum score rises above 7.0 within 6 months.
CounterA death cross pattern remains a concern, and the 200-day MA slope is still declining at approximately 3% per month; momentum could re-deteriorate on the next earnings miss, and the technical pattern resolves only on confirmed follow-through.
Per-dimension breakdown
Quality
7.6/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 7.5 |
| Gross margin | 5.0 |
| Op margin | 9.7 |
| Net margin | 7.9 |
| Current ratio | 6.7 |
| FCF quality | 6.2 |
| Moat | 6.1 |
| Piotroski F | 8.9 |
- ▸Excellent ROE: 34%
- ▸Strong margins: 16%
- ▸Strong Piotroski F-Score: 8/9
- ▸High-quality business
Growth
5.3/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 4.9 |
| EPS growth | 5.8 |
Momentum
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.4 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 3.4 |
- ▸Overbought (RSI 93)
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.0 |
| Price target | 5.5 |
| erm sentiment | 5.6 |
Insider
5.5/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.9 |
- ▸Insider selling (low materiality) — $2,165,598 (0.014% of mkt cap)
Peer rank
4.3/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 2.9 |
| quality rank | 7.7 |
| growth rank | 4.5 |
- ▸Superior ROE vs peers
Technical
3.7/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.8 |
| support resistance | 0.7 |
| 52w position | 9.7 |
Risk (lower is worse)
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.4 |
| days to cover | 8.4 |
| volatility | 6.2 |
| put call | 9.4 |
| implied vol | 7.8 |
| max pain risk | 3.0 |
| beta | 8.1 |
| debt equity | 5.0 |
- ▸Above max pain $125
Catalyst
4.6/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 3.1 |
| dividend safety | 6.8 |
- ▸Earnings concerns: 2B/2M
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- MOMENTUM:7.2>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:107d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.7=NEGATIVE
Warning (0)
none
Reward-to-Risk
-0.67
Upside
-10.1%
Downside
15.0%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 4.8 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Quality at 7.6) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-0.7=NEGATIVE) reinforce the read. Current asymmetry R:R is -0.67 — supplementary context, not the trigger for this path.
The strongest dimensions are Quality at 7.6, Momentum at 7.2, and Risk (lower is worse) at 7.0; the weakest are Technical at 3.7, Peer rank at 4.3, and Catalyst at 4.6. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -0.67 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1High Quality Financial Profile
Trip ifReturn on equity falls below 20% for 2 consecutive quarters.
- P2Consecutive Earnings Misses
Trip ifEPS positive surprise exceeds 3% for 2 consecutive quarters.
- P3Soft Growth With Leverage Burden
Trip ifRevenue growth exceeds 8% year-over-year for 2 consecutive quarters.
- P4Technical Recovery Forming
Trip ifPrice crosses above the 200-day moving average and momentum score rises above 7.0 for 4 consecutive weeks.