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Quote this valuation with its source: Fair value, Potential value and the price at analysis.
FAQ
ALLE — frequently asked questions
Is Allegion plc overvalued?
In our latest published analysis dated 2026-10-12, ALLE trades close to fair value. The price recorded at analysis is USD 150 versus our fair value of USD 157; the high endpoint is presented separately as potential value of USD 183. That implies roughly 4.3% upside to fair value at that date.
Our latest published report, analyzed 2026-10-12, gives ALLE a fair value of USD 157 and a potential value of USD 183. The conclusion is triangulated across multiple valuation models and weighted by reliability for Allegion plc's archetype; it is a dated research output, not a live price.
Should I buy ALLE now?
Our latest published rating for ALLE, analyzed 2026-10-12, is Hold. Allegion plc trades close to fair value at the analysis-date price of USD 150 versus fair value of USD 157; potential value is USD 183. This is research for educational purposes, not personalized investment advice.
What are the biggest risks for ALLE?
The dedicated bear-case section in our report analyzed 2026-10-12 documents Allegion plc's material risks, evidence, thresholds, and thesis-invalidation conditions. Scenario-specific explanations remain in that section so the report does not repeat or decontextualize them elsewhere.
What is ALLE's rating?
Our latest published rating for ALLE, analyzed 2026-10-12, is Hold, with a published moat assessment of 8/10 (Narrow). It reflects our fair value of USD 157, the potential value of USD 183, and the price recorded at analysis (USD 150).
Secular transition from mechanical cylinders to networked electronic access control, mobile credentials, and specialized data center doors (via Krieger Specialty Products), lifting hardware dollar content per opening by 3x to 5x and driving consolidated operating margins toward 23%.
Main risk
A prolonged freeze in commercial non-residential construction activity combined with unrecovered tariff-driven raw material inflation.
Allegion plc is rated Hold with an intrinsic Fair value of $156.50 per share and Potential value of $182.70, offering a 4.31% implied return relative to its share price of $150.04 as of October 12, 2026.4
Allegion operates a durable, high-return franchise centered on commercial door security hardware and electronic access systems. In FY2025, consolidated revenue reached $4,067.3 million with operating income of $859.5 million (21.13% operating margin). Earnings power is driven by the Americas segment, which produced $896.5 million in operating income on $3,218.8 million in revenue (27.85% margin). Brand equity in Schlage, Von Duprin, and LCN, combined with deep architectural specification networks, embeds Allegion products into master building blueprints and municipal building codes, securing pricing power and recurring institutional replacement demand.5,7,8
Growth is further supported by the secular transition toward electronic access control, mobile credentials, and smart hardware, which expands revenue per door opening by 3x to 5x relative to traditional mechanical locks. Tactical tuck-in acquisitions, such as Krieger Specialty Products, extend this specification moat into high-growth specialized verticals including hyperscale data centers. With capital expenditures representing just 2.41% of FY2025 revenue ($98.1 million), Allegion generated $685.7 million in free cash flow, converting 106.5% of net income and funding continuous share repurchases.5,6,7
However, consolidated returns are constrained by the International segment, which generated $848.5 million in revenue at an operating margin of 9.02% in FY2025. German macroeconomic weakness and ERP implementation production impacts have created volume headwinds. While management is executing a $10 million annual cost restructuring program, international dilution and commercial non-residential cyclical sensitivity balance the thesis. At $150.04, shares trade at a 4.1% discount to the fair value midpoint of $156.50, offering a modest 4.31% implied upside that warrants a Hold rating.4,5,8
Architectural Specification Lock-In and High Switching Costs
Allegion's flagship brands (Schlage, Von Duprin, LCN) are embedded directly into institutional building specifications, municipal building codes, and master blueprints, driving resilient recurring replacement demand and premium pricing power across North American non-residential facilities.5,8
Secular Tailwinds from Electronic Smart Lock Penetration
The ongoing conversion from mechanical hardware to networked electronic access control, mobile credentials, and cloud security expands total addressable dollar content per opening by 3x to 5x, driving high-single-digit organic growth in key verticals.5
With annual capex running at just 2.41% of revenue ($98.1M in FY2025), Allegion converts 85% to 95% of adjusted into available , returning cash to shareholders via repurchases and dividends while preserving balance sheet strength.
House recommendation
Allegion represents a premier industrial compounder whose exemplary Americas specification moat and high free cash conversion are balanced at current prices by European macro headwinds and modest valuation upside, supporting a Hold rating.
Company overview
Allegion plc is a global security products and solutions provider specializing in architectural hardware, access control systems, and electronic security solutions for commercial, institutional, and residential facilities. Spun off from Ingersoll Rand in 2013, Allegion operates through two primary reporting segments: Allegion Americas and Allegion International.
The company's core brands hold leading market positions, including Schlage (commercial and residential locks), Von Duprin (exit devices), LCN (door closers), Steelcraft (hollow metal doors and frames), and specialized European access brands including CISA, Interflex, and SimonsVoss. In FY2025, Allegion generated $4,067.3 million in consolidated revenue and $859.5 million in operating income.
A concurrent shock involving a commercial non-residential building freeze in the United States and deepened industrial recession in Germany severely impacts Allegion's financial performance. Under this stress scenario, consolidated operating margin compresses toward the 14.84% trough observed during the 2020 pandemic freeze. Unrecovered input cost inflation from tariffs on imported steel and hardware components, combined with negative volume leverage, reduces free cash flow generation by more than 25%. While Allegion's asset-light manufacturing structure and minimal maintenance capital expenditure requirements ($98.1 million capex in FY2025) shield the company from solvency risk, debt of $2,030.9 million would limit opportunistic capital return and depress valuation multiples toward lower peer levels.
Allegion's competitive advantage is anchored in its commanding position across North American non-residential door openings. The Americas segment contributed $3,218.8 million, or 79.14% of total FY2025 revenue, and $896.5 million in operating income, delivering a 27.85% segment margin. This pricing strength stems from an institutional specification network that binds architects, commercial building owners, and general contractors to brands like Schlage, Von Duprin, and LCN. Spec writers routinely design complete door assemblies matching Allegion's proprietary SKUs, ensuring replacement cycles flow to Allegion distributors over decades-long building lifespans.
The secular transition from mechanical keys to connected electronic access control reinforces these switching costs. Electronic lock adoption in commercial facilities and multifamily residential properties increases hardware dollar content per door opening by 3x to 5x while introducing recurring credential and software revenue. Recent strategic acquisitions, including Krieger Specialty Products, expand this specification moat into high-growth, mission-critical infrastructure like hyperscale data center campuses.
The highlighted cell is Fair value when every assumption sits at its base level ($156.50). Each row and column shows what Fair value becomes when one assumption moves.
Free cash flow to the firm stays positive in the first projected year at $693.1M after modeled reinvestment of $122.3M, with terminal value at 78.2% of enterprise value. A sudden drop in free cash flow is not projected unless capital spending relative to , reinvestment, or resets materially.
Accelerating electronic smart lock adoption in residential and institutional channels combined with faster European margin recovery confirms structural operational leverage.
In-line
Maintain Hold; Preserve existing exposure, monitor quarterly institutional backlogs, and track completed restructuring run rates.
Trigger: Adjusted EPS between $8.85 and $9.00 and organic revenue growth between 3.5% and 4.5%
Capex was $98.1 million in FY2025 against revenue of $4,067.3 million (2.41% capex-to-revenue ratio), and 6M 2026 capital expenditures stood at $38.9 million. Reinvestment requirements remain modest, modeled at 15% of NOPAT. Capacity expansion remains disciplined, with capital allocated toward software integration and assembly efficiency rather than heavy facility expansion.7
Bull cycle
The commercial non-residential and institutional building cycle enters an expansive phase driven by educational facility safety upgrades, healthcare construction, and rapid adoption of connected electronic access solutions. High demand in data center construction and institutional facilities elevates specification volumes, while residential smart lock penetration expands addressable revenue per door opening by 3x to 5x.
§11 Position management
Sizing
2-3%
Under a Hold rating with an implied return of 4.31% to the fair value midpoint of $156.50, position sizing should match benchmark neutral exposure (2-3% of equity portfolio). The business demonstrates outstanding cash generation and specification defensibility, but prevailing valuation levels do not offer sufficient discount to justify an overweight stance.4
Risk
Risk management focuses on monitoring commercial architectural billing indices, non-residential spec activity, raw material tariff exposure, and European macro indicators. Total debt of $2,030.9 million is manageable against $685.7 million in annual free cash flow, but leverage must be monitored if international restructuring stalls.
Entry tranches
§12 Investor perspectives
Institutional Quality Compounder
Hold
Allegion commands an exceptional Grade 1 specification moat in the Americas with strong pricing power and 85%-95% cash flow conversion. However, with shares trading at $150.04 against a fair value midpoint of $156.50, current valuation fairly reflects business strengths.4,5
Growth and Electronic Conversion
Hold
Secular transition toward electronic locks and smart infrastructure provides high-single-digit organic growth potential in residential and institutional doors. Nonetheless, near-term European weakness limits upside.5
Value and Margin of Safety
Hold
§14 Final recommendation
Action
Hold
Allegion plc is rated Hold with an intrinsic Fair value midpoint of $156.50 and Potential value of $182.70, representing 4.31% upside from its share price of $150.04 as of October 12, 2026.4
While the Americas architectural specification moat delivers robust 27.85% operating margins and strong free cash conversion, current valuation adequately reflects operating strengths against persistent European industrial softness.
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Sources
The records this analysis drew on, as they stood when it was run.
Analyst consensusData as of 2026-10-12 · Published 2026-10-12 · Provider-adjusted · cited for 4 figuresCited in Bear case, Earnings decision tree
Macro and cost of capitalData as of 2026-10-12 · Published 2026-10-12 · cited for 6 figuresCited in Competitive moat, Financial history
Market and peer researchData as of 2026-10-12 · Published 2026-10-12 · Provider-adjusted · cited for 1 figureCited in Bear case
Under the Bear trajectory, prolonged high interest rates and commercial real estate freezes depress non-residential project completions. Unrecovered tariff inflation on imported hardware components compresses operating margins toward 18.8%, while persistent German economic weakness prolongs International volume contraction.
Ways this thesis can break
Severe Non-Residential Construction Freeze and Tariff-Driven Margin Compression
In FY2020, Allegion operating margin contracted sharply to 14.84% during commercial construction freezes. A prolonged freeze in non-residential commercial builds combined with unrecovered tariff inflation would compress operating margin below 18.8% (300 bps below the 21.8% baseline target).5,7
FV impact
-2.8%
Operating margin 3 points lower throughout
Trigger
Within 12 months
Multiple De-Rating on Structural Growth Deceleration and Institutional Spec Erosion
Current forward P/E is 15.92x and base terminal multiple is modeled at 16.0x. If competitive encroachment in smart access accelerates or non-residential replacement cycles lengthen, Allegion exit multiple would de-rate by 20% to 12.8x, converging toward peer industrial valuation levels like HII at 12.60x.3,4
FV impact
-5%
Terminal multiple 20% lower
Trigger
Within 24 months
European Industrial Recession Spillover and US Commercial Capex Retrenchment
Consensus models 8.41% revenue growth in FY2026 and 5.03% in FY2027. However, International organic revenue declined 1.2% in Q2 2026 and 3.2% in 6M 2026, with Germany worsening. If European macro weakness spreads to domestic non-residential construction, 5-year revenue CAGR would drop by 500 bps to below 1.5%.1,5
FV impact
-5.8%
Revenue and EPS growth 5 points lower for five years
Trigger
Within 36 months
Early-warning signals to monitor
The five developments that would weaken our investment case.
A drop below 18.8% confirms severe margin compression from unrecovered raw material tariffs and commercial construction volume deleveraging, approaching the 14.84% FY2020 trough.
Current:21.13% in FY2025 (22.1% reported and 24.2% adjusted in Q2 2026)
Margin contraction below 25.0% in the Americas signals institutional specification breakdown and aggressive pricing concessions under commercial non-residential slowdowns.
Current:27.85% in FY2025 ($896.5M operating profit on $3,218.8M revenue)
Deceleration below 2.0% signals that secular electronic smart lock adoption has stalled and revenue per door opening has reverted to replacement GDP levels.
Current:106.5% in FY2025 ($685.7M FCF on $643.8M net income) (85%-95% full-year 2026 guidance)
Despite the strength of the Americas franchise, Allegion's overall economic moat is rated Narrow. The International division, which generated $848.5 million in FY2025 revenue, operates in fragmented European markets with lower institutional spec capture, producing an operating margin of 9.02%. This margin disparity dilutes consolidated return on capital, preventing a Wide moat classification.
Allegion generates returns on invested capital substantially above its cost of capital (WACC of 8.17%), anchored by Americas segment operating margins of 27.85% in FY2025. Consolidated economic profit is diluted by the International business, which produced an operating margin of 9.02% on $848.5 million in revenue in FY2025, supporting a Narrow rather than Wide moat rating.2,8
8/ 10
Narrow
Sources of advantage
01Switching Costs — Architectural specification writers embed Allegion brands like Schlage, Von Duprin, and LCN directly into master building blueprints and municipal building codes, creating massive switching costs and locking in replacement demand across institutional facilities.Wide
02Intangible Assets (Brands and Specification Proprietary Standards) — Grade 1 commercial mechanical and electronic hardware standards (Schlage, Von Duprin, LCN) hold entrenched institutional mindshare among facility managers, institutional buyers, and architects, securing pricing power.Wide
Prolonged European Non-Residential Building Stagnation and German Macro Deterioration
medium
12-24 months
Management is executing a $10 million annual cost reduction program reaching full run rate in Q4 2026, catching up on ERP implementation production disruptions, and implementing targeted European price increases.5
Tariff-Driven Raw Material Inflation and Non-Residential Commercial Build Delays
medium
12-18 months
Disciplined Grade 1 price realization and ongoing productivity programs offset input cost inflation, maintaining positive price/cost spread in the Americas.5
Competitive Encroachment in Smart Access and Mobile Credential Platforms
low
3-5 years
Active portfolio expansion into specialized verticals including hyperscale data centers via Krieger Specialty Products and continuous integration of networked electronic hardware.5
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and at , then adjust for signed per current share.
International operating margin recovers substantially with strong German industrial rebound
Under the Bull path, secular conversion to electronic access accelerates across both commercial institutional and residential markets, lifting organic revenue growth well above baseline rates. Americas specification win rates remain robust while specialized door solutions in hyperscale data centers expand rapidly. International restructuring exceeds expectations, restoring European operating margins substantially and driving strong EPS expansion.5
Allegion exhibits high earnings quality supported by a clean reconciliation between GAAP and adjusted metrics. In Q2 2026, GAAP diluted EPS was $2.15 compared to adjusted EPS of $2.40. Non-GAAP adjustments are standard and recurring, comprising $17.2 million of acquired intangible amortization ($0.20 per share) and $6.9 million of restructuring and integration costs ($0.05 per share). Cash conversion is robust, with FY2025 free cash flow of $685.7 million exceeding GAAP net income of $643.8 million (106.5% conversion). Available cash flow is guided to convert at 85% to 95% of adjusted net income for full-year 2026.5,6,7
Estimate momentum
Earnings estimate revisions have trended positively following the Q2 2026 earnings release, where management raised full-year adjusted EPSguidance from prior levels to $8.85-$9.00. Consensus FY2026 EPS estimates adjusted from $8.95 to $8.96 per share, while FY2027 EPS estimates moved from $9.77 to $9.78 per share. Consolidated revenue expectations were fine-tuned to $4,409.5 million for FY2026 and $4,631.4 million for FY2027.1,5
Cash generation is exceptionally strong, characterized by consistent conversion of accounting earnings into free cash flow. In FY2025, free cash flow was $685.7 million on GAAP net income of $643.8 million, representing a 106.5% conversion rate. For the first half of 2026, operating cash flow stood at $299.7 million and available cash flow at $260.8 million, down slightly by $14.6 million year-over-year due to working capital timing from strong late-quarter Americas revenue. Management guided full-year 2026 available cash flow conversion at 85% to 95% of adjusted net income, fully supporting our forecast model's 15% reinvestment rate assumption.5,6,7
Allegion maintains a disciplined capital allocation strategy focused on high-return reinvestment, steady dividend growth, programmatic share repurchases, and tuck-in M&A. In FY2025, operating cash flow reached $783.8 million with capital expenditures of only $98.1 million. In the first six months of 2026, the company deployed $160.6 million to share repurchases (including $120 million in Q2 2026 to retire ~0.9 million shares), paid $94.0 million in dividends, and invested $75.5 million in business acquisitions. Total debt stood at $2,030.9 million against $320.6 million in cash at June 30, 2026, maintaining a conservative leverage profile and preserving liquidity.
Allegion's return on invested capital remains well in excess of its cost of capital, supported by strong return on equity (ROE modeled at 33.73%) and consolidated operating margins rising from 21.13% in FY2025 toward 21.96% in FY2026 and 22.81% by FY2030.
Economic returns comfortably clear the computed WACC of 8.17% (derived from cost of equity 8.74%, pre-tax cost of debt 5.76%, effective tax rate 14.51%, 85.17% equity weight, and 14.83% debt weight).
Americas segment drives company earnings power and offsets international dilution
Americas delivered $896.5 million in operating income on $3,218.8 million in revenue in FY2025 (27.85% margin), rising to a 30.1% adjusted operating margin in Q2 2026. In contrast, International FY2025 operating profit was $76.5 million on $848.5 million in revenue (9.02% margin).
Enterprise earnings and valuation are overwhelmingly tethered to US commercial architectural specification activity and pricing realization.
Asset-light operations deliver compounding free cash flow with minimal capex
Income statement breakdownHow business scale converts into reported profit.
StockMarketAgent.AI
Revenue$4.1BCost of revenue−$2.2BGross profit$1.8BOperating expenses−$978.8MOperating income$859.5MNon-operating items and tax−$215.7MNet income$643.8M
Financial history data
Revenue
$4,067,300,000
Cost of revenue
$2,229,000,000
Gross profit
$1,838,300,000
Operating expenses
$978,800,000
Operating income
$859,500,000
Non-operating items and tax
-$215,700,000
Net income
$643,800,000
Balance sheet snapshotHow reported assets are held and financed at the selected period.
StockMarketAgent.AI
Assets held asFinanced by
Total assets$5.2BCash$356.2MCurrent assets$1.4BTotal liabilities$3.2BCurrent liabilities$755.4MShareholders’ equity$2.1B
Balance sheet breakdown data
Total assets
$5,223,700,000
Cash
$356,200,000
Current assets
$1,391,800,000
Total liabilities
$3,156,100,000
Current liabilities
$755,400,000
Shareholders’ equity
$2,067,600,000
Cash-flow statement breakdownHow cash moved through operating, investing, and financing activities in FY2025.
StockMarketAgent.AI
Operating cash reconciliation
Net income$643.8MDepreciation and amortization+$129.7MStock-based compensation+$29.8MOther operating adjustments−$19.5MOperating cash flow$783.8M
Allegion plc (ALLE) trades at 15.9x forward earnings against a peer median of 15.7x. Its EV/EBITDA of 14.0x compares with a peer median of 12.7x. The comparison uses 4 peers: Generac Holdings Inc., Huntington Ingalls Industries Inc., Equifax Inc. and J.B. Hunt Transport Services Inc., as of 2026-10-12.
Bear cycle
Elevated interest rates and tighter commercial financing trigger project cancellations and deferrals in non-residential construction. Prolonged European economic stagnation, particularly across German industrial centers, suppresses international volume demand and compresses pricing spreads.
Secular trends
Trend
Impact
Note
Transition to Connected Electronic Access and Mobile Credentials
positive
Commercial and institutional facilities are migrating from mechanical cylinders to networked smart locks, boosting hardware dollar content per door opening by 3x to 5x and creating recurring software attach opportunities.
Institutional Life-Safety and Building Code Mandates
positive
Stringent egress, fire-code, and accessibility requirements (ADA and NFPA standards) heavily favor established Grade 1 hardware brands like Von Duprin and LCN, insulating institutional replacement cycles from speculative building volatility.
Hyperscale Data Center and Critical Infrastructure Expansion
positive
Surging demand for secure, acoustically sealed, and high-performance physical security doors across AI data center campuses expands specialized institutional hardware demand.
Positioning
Allegion holds the leading market position in Americas commercial access hardware, supported by proprietary specification networks. This dominant position enables the company to harvest substantial cash flows from mature mechanical product lines while funding expansion in networked electronic security solutions and specialized institutional verticals.
Level
Action
Why
$150.04 (Current Market Level)
Hold / Maintain existing allocation
Shares trade within 4.1% of intrinsic fair value midpoint ($156.50), offering fair risk-adjusted compensation but inadequate margin of safety for fresh capital deployment.
$135.00 - $140.00
Opportunistic accumulation on pullback
A pullback into this range would expand implied upside above 12-16% relative to the $156.50 fair value midpoint, establishing an attractive margin of safety backed by Americas specification cash flows.
Exit tranches
Level
Action
$170.00 - $175.00
Trim position and harvest gains as shares approach consensus targets
Investigate working capital build-up and review pace of share repurchases.
A 4.1% discount to intrinsic value provides insufficient margin of safety for new capital allocation. Existing holders should maintain positions to capture ongoing cash compounding and share buybacks.4
Not every cited input appears here: internal calculations and intermediate model outputs have no external record, and some citations could not be matched to one.
Alert ifBelow 75.0% of adjusted net income for a full fiscal year
Discounted forecast-period cash flows ($36.23) plus discounted terminal value ($130) minus signed net debt per current share ($19.10) equals the $147 lens value shown above. Negative net debt is net cash, so subtracting it raises value.
