ALLE

We rate Allegion plc (ALLE) as a Hold with a composite score of 58.1/100 at a current price of $158.92. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (87th percentile) and momentum (74th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (29th percentile) and quality (57th percentile) tempers our overall conviction. We assign a Narrow Moat rating (65/100), Low uncertainty, and Standard capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Allegion plc holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 58.1/100 places it at rank #887 in our full 7,333-stock universe. With a $15.2B market capitalization, Allegion plc operates at meaningful scale within the Services sector, providing competitive advantages in distribution, procurement, and customer reach.

The outlook is moderately positive, with revenue expanding at 11% and favorable momentum (74th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 45% (-14.3pp vs sector) narrow to operating margins of 22% (+18.1pp vs sector) and net margins of 16.7%, yielding a gross-to-net conversion rate of 37%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $158.92, Allegion plc is trading near fair value based on current fundamentals. Our value factor score of 58/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 20.8x (roughly in line with the sector median of 23.7x), EV/EBITDA of 18.4x (at a premium), P/B of 6.8x, P/S of 3.5x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Low uncertainty rating to Allegion plc. The company exhibits strong financial stability with a beta of 0.65, and a stability factor in the 87th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.65 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 87th percentile and quality factor at the 57th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 45% provide a buffer against cost pressures; above-average stability (87th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Allegion plc's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 32.4%, and the balance sheet is managed within acceptable parameters (D/E: 96%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Allegion plc falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 1.13% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Allegion plc receives a Hold rating with a composite score of 58.1/100 (rank #887 of 7,333). Our quantitative framework assigns a Narrow Moat (65/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 61/100.

Our analysis supports a neutral stance on Allegion plc. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.