Back to top

Image: Bigstock

Allison Transmission (ALSN) Hits 52-Week High, Can the Run Continue?

Read MoreHide Full Article

Have you been paying attention to shares of Allison Transmission Holdings (ALSN - Free Report) ? Shares have been on the move with the stock up 9.6% over the past month. The stock hit a new 52-week high of $53.55 in the previous session. Allison Transmission Holdings has gained 24.1% since the start of the year compared to the -5.8% move for the Zacks Auto-Tires-Trucks sector and the -1.7% return for the Zacks Automotive - Original Equipment industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 30, 2018, Allison Transmission reported EPS of $1.29 versus consensus estimate of $1 while it beat the consensus revenue estimate by 8.98%.

For the current fiscal year, Allison Transmission is expected to post earnings of $4.43 per share on $2.66 billion in revenues. This represents a 66.54% change in EPS on a 17.52% change in revenues. For the next fiscal year, the company is expected to earn $4.54 per share on $2.62 billion in revenues. This represents a year-over-year change of 2.42% and -1.41%, respectively.

Valuation Metrics

Allison Transmission may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Allison Transmission has a Value Score of B. The stock's Growth and Momentum Scores are C and D, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 12.1X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 13X versus its peer group's average of 6.7X. Additionally, the stock has a PEG ratio of 1.21. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Allison Transmission currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Allison Transmission passes the test. Thus, it seems as though Allison Transmission shares could have potential in the weeks and months to come.

How Does Allison Transmission Stack Up to the Competition?

Shares of Allison Transmission have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Meritor , Gentherm (THRM - Free Report) , and Oshkosh (OSK - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Allison Transmission. Still, the fundamentals for Allison Transmission are promising, and it still has potential despite being at a 52-week high.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Allison Transmission Holdings, Inc. (ALSN) - free report >>

Oshkosh Corporation (OSK) - free report >>

Gentherm Inc (THRM) - free report >>