Allison Transmission Holdings, Inc. (ALSN): A Bull Case Theory

We came across a bullish thesis connected Allison Transmission Holdings, Inc. connected Divergent Capital’s Substack. In this article, we volition summarize the bulls’ thesis connected ALSN. Allison Transmission Holdings, Inc.'s stock was trading astatine $89.46 arsenic of November 26th. ALSN’s trailing and guardant P/E were 10.98 and 9.19 respectively according to Yahoo Finance.

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Allison Transmission Holdings, Inc., unneurotic with its subsidiaries, designs, manufactures, and sells afloat automatic transmissions for medium- and heavy-duty commercialized vehicles and medium- and heavy-tactical U.S. defense vehicles, and electrified propulsion systems worldwide. ALSN acquisition of Dana Inc.’s Off-Highway concern for $2.73 cardinal creates a compelling, de-risked accidental with meaningful upside arsenic the woody is afloat funded done caller indebtedness and currency connected manus and is immediately free-cash-flow accretive.

The transaction adds roughly $288 million of incremental yearly FCF, lifting pro forma FCF to $987 cardinal and driving ALSN’s valuation to conscionable ~7.1× pro forma FCF—far beneath the adjacent median of 20.8× contempt superior pro forma operating margins of ~20.6% and pre-tax ROTA of ~26%. With each regulatory approvals secured, nary request for shareholder consent, and imperishable financing already arranged—including a $500 cardinal notes offering and a $1.2 cardinal word indebtedness installation backstopped by a afloat committed $2 cardinal span loan—the woody carries near-zero regulatory oregon financing risk. Closing is expected by precocious 2025, eliminating the cardinal uncertainties tied to the $120 cardinal interruption fee, which tin nary longer beryllium triggered fixed approvals are successful hand.

Although the acquisition raises semipermanent indebtedness by astir $2 billion, ALSN maintains beardown sum ratios, with EBITDA/interest of ~8× and FCF/interest of ~4.8×, supported by the transaction’s highly accretive currency travel profile. The marketplace has yet to bespeak these dynamics, and the stock’s re-rating is expected erstwhile combined financials people successful Q4 2025 oregon Q1 2026. Even a partial aggregate normalization to 8×–12× FCF implies 12%–70%+ upside, with triple-digit imaginable astatine peer-median levels. Downside appears constricted fixed the stock’s diminution from ~$102 pre-announcement and the removal of break-fee and deal-execution risks, creating a favorable skew for investors up of closing.

Previously we covered a bullish thesis on Gentex Corporation by The Antifragile Investor successful January 2025, which highlighted the company’s enactment successful electrochromic mirrors, diversification into aviation and astute location safety, and beardown fiscal fundamentals. The company’s banal terms has depreciated approximately by 17.94% since our coverage. This is due to the fact that the thesis didn’t fully play out. The thesis inactive stands arsenic Gentex’s innovation pipeline and planetary partnerships enactment semipermanent growth. The Antifragile Investor shares an identical presumption and emphasizes the aforesaid strengths.