Allegion is a high quality business, with clear sustainable competitive advantages, operating in an attractive industry and is trading at a reasonable valuation due to worries around short term inflation headwinds.
We like ALLE’s pricing power and high incremental margins driving 20%+ return on capital and strong free cash flow.
We see upside to 20% EPS growth over 2021-23 driven by improving margins, increasing penetration of electronic locks and a cyclical bounce in non-residential spending.
Potential Upside: $181 (+33%)
Sensible Downside: $114 (-14%)
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