ALLENYSEThe short version
Allegion plc
Allegion makes the locks, exit devices and access controls behind Schlage and Von Duprin, earning roughly double its peers' operating margin from a North American franchise whose shares recently fell 30% and recovered.
From a $180 February peak to a $126 May trough and back near $158 — a full 30% round trip in six months.
Mkt cap $14.0BNet debt $1.7BEV $15.7BP/E FY27E 16.3×ND/EBITDA FY27E 1.5×
$158
Share price
$13.7B
Market cap
2.3%
Adjusted FCF yield
$4.07B
FY2025 revenue
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Snapshot
Allegion plc in numbers
Price
$158.14as of 2026-07-27
Mkt cap
$14.0B
Net debt
$1.7B
EV
$15.7B
3m ADV
$162.7M
| Year to Dec (USD) | 2023 | 2024 | 2025 | 2026E | 2027E | 2028E |
|---|---|---|---|---|---|---|
| Sales | 3.7B | 3.8B | 4.1B | 4.4B | 4.6B | 4.9B |
| EBITDA | 827.5M | 899.7M | 992.7M | 1.1B | 1.2B | 1.3B |
| EBIT | 715.9M | 780.7M | 859.5M | 1.0B | 1.1B | 1.2B |
| EBIT margin | 19.6% | 20.7% | 21.1% | 23.2% | 23.6% | 24.1% |
| EPS | 6.12 | 6.82 | 7.44 | 8.94 | 9.72 | 10.68 |
| EV/EBITDA | 18.9× | 17.4× | 15.8× | 14.2× | 13.3× | 12.4× |
| EV/EBIT | 21.9× | 20.1× | 18.2× | 15.3× | 14.3× | 13.4× |
| P/E | 25.8× | 23.2× | 21.3× | 17.7× | 16.3× | 14.8× |
| FCF yield | 3.7% | 4.2% | 4.9% | 4.9% | 5.5% | 6.2% |
| Gearing | 117.3% | 99.7% | 78.5% | – | – | – |
Consensus: S&P Capital IQ (CapIQ) · as of 2026-07-27Derived from run data; ratios use the latest price.
IThe business
The business
The richest margin in the doorway
FY2025 revenue by product
Mechanical$2.7B67%
Electronic$1.1B27%
Services & software$0.3B7%
Two-thirds mechanical locks and exit devices; electronics the faster-growing quarter.
- Behind the brands. Schlage locks, Von Duprin exit bars and LCN closers — mostly specification-grade hardware sold into schools, hospitals and offices.
- Double the field. A 21.1% operating margin is roughly twice the 9.9% median of its building-products peers, and revenue grew while three of four peers shrank.
The engine
One segment earns nearly all the profit
Americas vs International (FY2025)
A fifth of revenue, but only 8% of segment profit, comes from International.
- Americas carries it. The North American franchise earns a 27.9% margin and 92% of segment operating income; year-10 durability is really a bet on this one engine.
- The tension. International runs a 9.0% margin — yet it is the segment Allegion is now spending most heavily to enlarge.
IIIThe story now
The fit
Durable business, but no setup today
Met
Year-10 durability gatep 0.85
2.3%
Adjusted FCF yield vs 10% bar768 bps short
0.73
Odds the impairment is temporary
High
Confidence — two model families agreed
- Passes the quality tests. Year-10 revenue and cash flow read durable (0.85), the balance sheet outlasts the problem, and the earnings dent looks temporary (0.73).
- Fails the entry trigger. No dated event caused the drop, and the adjusted FCF yield is 2.32% against a 10% bar — the two conditions the framework treats as decisive together.
- The counter. On unadjusted cash flow the yield is a healthier 5.0%, and the 30% fall has round-tripped to −12% — so a quality business is priced like one again.
The dislocation
A 30% fall that already round-tripped
- Down then back. The stock fell 30.1% from a $179.77 February peak to $125.65 in May, then rebounded to $158 — only 12% below the high.
- No trigger, no panic. No dated company event caused the drop, and fall-leg volume ran just 1.32 times normal, short of the 2x that marks a capitulation.
- The discount closed. The rebound followed a Q2 beat-and-raise, so whatever entry discount the fall opened has largely gone.
The damage
Price fell while earning power didn't
Consensus free cash flow ($M)
Modeled cash generation rises every year even as the stock sold off.
- Contained to the edge. The stumble was a self-inflicted ERP switch in International, about 8% of profit; Americas operating income grew 12.5% in Q2.
- Estimates rose, not fell. Consensus free cash flow climbs through FY2028 and guidance was affirmed then raised — the drop repriced sentiment, not modeled earnings.
- The counter. The residual drag is real German demand weakness that prompted restructuring and need not mean-revert within a year.
Cash quality
Profit turns into cash with little leakage
1.07x
Free cash flow to net earnings
2.4%
Capex as a share of revenue
$524.7M
Average FCF, FY2021–FY2025
- Real earnings. Free cash flow topped net earnings every year, and 2025's $685.7M was 1.07 times reported profit on capex of just 2.4% of sales.
- Consistent, not proven. Free cash flow was positive all five years and rose in four; the framework's stricter adjusted-stability test could not be built from the record.
Self-help
Buybacks are real but now play second fiddle
Where the cash went ($M)
Deals, not repurchases, are the largest discretionary use of cash.
- Share count falling. Diluted shares dropped from 88.3M to 86.6M, with about $420.9M of buybacks over four years and ~$160M left on the authorization.
- Deals come first. FY2025 buybacks were cut to $80M — none in Q4 — to help fund $592.2M of acquisitions ranked ahead of repurchases.
- Room to wait. The balance sheet outlasts any problem: first maturity is 2027, about $784M undrawn on the revolver, 1.6x leverage.
The guardrails
None of the disqualifiers tripped
Framework exclusions
| Test | Result |
|---|---|
| Auto manufacturer | No |
| Promotion pattern | No |
| Structural decline | No |
| China dependence | Immaterial |
| Rising share count | No |
- Clean sweep. Revenue rose every year FY2022–FY2025, insiders own under 1%, and no promise-versus-delivery pattern appears in the record.
- Low China risk. China is under 5% of cost of goods and not a separately material revenue line inside a 25%-non-US, Europe-led mix.
IVThe price
The yield
The yield sits far below the bar
Adjusted FCF yield vs the bar
Adjusted FCF yield
2.3%
Unadjusted FCF yield
5%
Consensus forward peak (FY28)
6.3%
Even the forward peak never reaches the balance-sheet bar.
- 768 bps short. On the framework's definition the adjusted FCF yield is 2.32%, below the 10% bar — and below the 8.5% fortress line too.
- No path there. Consensus forward yield peaks at 6.33% in FY2028 and never clears the bar; the odds of reaching it within three years were put at 0.05.
- The counter. Unadjusted, the yield is 5.0%; the gap is driven almost entirely by a genuine ~$338M-a-year average acquisition deduction.
What's priced in
The price underwrites a steady climb
Consensus adjusted EPS ($)
About 17.7x FY2026 EPS — a multiple that steps down only if earnings keep rising.
- A premium on quality. At $158 the stock trades near 17.7 times FY2026 consensus EPS and a 5.0% cash yield — richer than the peer median.
- Growth must show up. Consensus has revenue up 8.5% then about 5%, leaning on a volume rebound and an International recovery that has yet to arrive.
The re-rating math
What a bar-clearing re-rating would take
~$1,369M
Adjusted FCF needed to clear the 10% bar
~$867M
Consensus FCF peak, FY2028
−12%
Where the stock sits vs its February high
- Roughly double. Clearing the 10% bar at today's value needs adjusted FCF near $1,369M against a consensus that peaks around $867M — a doubling no cited mechanism underwrites.
- Already re-rated. The 30% fall has round-tripped to −12%, so the market has largely repriced the temporary dent rather than left a discount standing.
- Quality without the price. The durability tests pass; the entry arithmetic does not clear today.
What to watch
A high-quality compounder that isn't, today, a dislocation buy — both can be true at once.
- 01Americas organic revenue turns negative in Q3 or Q4 2026
- 02FY2026 guidance is cut below the Q2 raised outlook
- 03International organic revenue remains negative through FY2026
- 04Consensus FY2027-28 FCF is revised down toward the FY2025 ~$686M level
This distills a fixed fit test built tab by tab.
Compiled from the full report · 2026-07-28 · For information, not investment advice.