ALSN

Allison Transmission is a high-quality industrial franchise trading at an undemanding valuation. FY2025 revenue dipped 6.7% to $3.01B and net income fell 14.8% to $623M, a cyclical pullback from the FY2024 peak ($3.23B revenue, $731M net income), but the underlying profitability is exceptional: 48.6% gross margin, 29.2% operating margin, 20.7% net margin and a 33.4% return on equity. At $119.10 the stock trades at just 16.2x diluted EPS of $7.33 and 3.3x sales — a modest multiple for a business that consistently converts revenue into profit and generated $836M of operating cash flow (up 4.4%) against only $175M of capex.

Management is returning capital aggressively while the balance sheet strengthens. The company repurchased $328M of stock (up 29.1%) and paid $91M of dividends in FY2025, shrinking the share count 3.2% to 82.8M. Cash nearly doubled to $1.50B (+91.4%), and although long-term debt rose 20.5% to $2.88B and liabilities/equity sits at 2.26x, the cash build and $836M of operating cash flow comfortably support the leverage. Equity grew 13.1% to $1.87B. The recent step-up in current assets (+45.2% to $2.23B) and debt likely reflects the Acquired Off-Highway Business, which broadens the end-market footprint.