Intrinsic value of Allegion plc - ALLE

Previous Close

$94.57

  Intrinsic Value

$91.50

stock screener

  Rating & Target

hold

-3%

Previous close

$94.57

 
Intrinsic value

$91.50

 
Up/down potential

-3%

 
Rating

hold

We calculate the intrinsic value of ALLE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 8.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  12.70
  11.93
  11.24
  10.61
  10.05
  9.55
  9.09
  8.68
  8.31
  7.98
  7.68
  7.42
  7.17
  6.96
  6.76
  6.59
  6.43
  6.28
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
Revenue, $m
  3,079
  3,446
  3,834
  4,240
  4,667
  5,112
  5,577
  6,061
  6,565
  7,089
  7,634
  8,200
  8,789
  9,400
  10,036
  10,697
  11,384
  12,099
  12,844
  13,620
  14,428
  15,271
  16,151
  17,069
  18,027
  19,028
  20,074
  21,167
  22,311
  23,508
Variable operating expenses, $m
  2,430
  2,702
  2,990
  3,292
  3,609
  3,940
  4,285
  4,644
  5,019
  5,408
  5,670
  6,090
  6,527
  6,981
  7,453
  7,944
  8,454
  8,986
  9,539
  10,115
  10,715
  11,341
  11,995
  12,676
  13,388
  14,131
  14,908
  15,720
  16,570
  17,458
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,430
  2,702
  2,990
  3,292
  3,609
  3,940
  4,285
  4,644
  5,019
  5,408
  5,670
  6,090
  6,527
  6,981
  7,453
  7,944
  8,454
  8,986
  9,539
  10,115
  10,715
  11,341
  11,995
  12,676
  13,388
  14,131
  14,908
  15,720
  16,570
  17,458
Operating income, $m
  649
  744
  844
  948
  1,058
  1,173
  1,292
  1,417
  1,547
  1,681
  1,965
  2,110
  2,262
  2,419
  2,583
  2,753
  2,930
  3,114
  3,305
  3,505
  3,713
  3,930
  4,156
  4,392
  4,639
  4,897
  5,166
  5,447
  5,742
  6,050
EBITDA, $m
  849
  950
  1,057
  1,169
  1,287
  1,410
  1,538
  1,671
  1,810
  1,955
  2,105
  2,261
  2,423
  2,592
  2,767
  2,949
  3,139
  3,336
  3,542
  3,756
  3,979
  4,211
  4,453
  4,706
  4,971
  5,247
  5,535
  5,837
  6,152
  6,482
Interest expense (income), $m
  56
  78
  93
  108
  125
  142
  161
  180
  199
  220
  242
  264
  287
  311
  336
  362
  390
  418
  447
  478
  509
  543
  577
  613
  651
  690
  731
  773
  818
  865
  913
Earnings before tax, $m
  571
  651
  735
  823
  916
  1,012
  1,113
  1,217
  1,326
  1,440
  1,701
  1,823
  1,950
  2,083
  2,220
  2,363
  2,512
  2,667
  2,828
  2,996
  3,171
  3,353
  3,543
  3,742
  3,949
  4,166
  4,393
  4,629
  4,877
  5,136
Tax expense, $m
  154
  176
  198
  222
  247
  273
  300
  329
  358
  389
  459
  492
  527
  562
  599
  638
  678
  720
  763
  809
  856
  905
  957
  1,010
  1,066
  1,125
  1,186
  1,250
  1,317
  1,387
Net income, $m
  417
  475
  537
  601
  668
  739
  812
  889
  968
  1,051
  1,241
  1,331
  1,424
  1,520
  1,621
  1,725
  1,834
  1,947
  2,064
  2,187
  2,314
  2,448
  2,587
  2,732
  2,883
  3,041
  3,207
  3,379
  3,560
  3,749

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,168
  3,546
  3,944
  4,363
  4,801
  5,259
  5,738
  6,236
  6,754
  7,294
  7,854
  8,436
  9,042
  9,671
  10,325
  11,005
  11,712
  12,448
  13,214
  14,012
  14,844
  15,711
  16,616
  17,560
  18,546
  19,576
  20,652
  21,777
  22,954
  24,185
Adjusted assets (=assets-cash), $m
  3,168
  3,546
  3,944
  4,363
  4,801
  5,259
  5,738
  6,236
  6,754
  7,294
  7,854
  8,436
  9,042
  9,671
  10,325
  11,005
  11,712
  12,448
  13,214
  14,012
  14,844
  15,711
  16,616
  17,560
  18,546
  19,576
  20,652
  21,777
  22,954
  24,185
Revenue / Adjusted assets
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
  0.972
Average production assets, $m
  1,025
  1,148
  1,277
  1,412
  1,554
  1,702
  1,857
  2,018
  2,186
  2,361
  2,542
  2,731
  2,927
  3,130
  3,342
  3,562
  3,791
  4,029
  4,277
  4,535
  4,805
  5,085
  5,378
  5,684
  6,003
  6,336
  6,685
  7,049
  7,430
  7,828
Working capital, $m
  176
  196
  219
  242
  266
  291
  318
  345
  374
  404
  435
  467
  501
  536
  572
  610
  649
  690
  732
  776
  822
  870
  921
  973
  1,028
  1,085
  1,144
  1,207
  1,272
  1,340
Total debt, $m
  1,718
  2,009
  2,315
  2,636
  2,973
  3,325
  3,692
  4,075
  4,473
  4,887
  5,317
  5,765
  6,230
  6,713
  7,215
  7,737
  8,280
  8,846
  9,434
  10,047
  10,686
  11,352
  12,047
  12,772
  13,529
  14,320
  15,146
  16,011
  16,914
  17,860
Total liabilities, $m
  2,433
  2,723
  3,029
  3,350
  3,687
  4,039
  4,406
  4,789
  5,187
  5,601
  6,032
  6,479
  6,944
  7,427
  7,929
  8,452
  8,995
  9,560
  10,148
  10,761
  11,400
  12,066
  12,761
  13,486
  14,243
  15,034
  15,861
  16,725
  17,629
  18,574
Total equity, $m
  735
  823
  915
  1,012
  1,114
  1,220
  1,331
  1,447
  1,567
  1,692
  1,822
  1,957
  2,098
  2,244
  2,395
  2,553
  2,717
  2,888
  3,066
  3,251
  3,444
  3,645
  3,855
  4,074
  4,303
  4,542
  4,791
  5,052
  5,325
  5,611
Total liabilities and equity, $m
  3,168
  3,546
  3,944
  4,362
  4,801
  5,259
  5,737
  6,236
  6,754
  7,293
  7,854
  8,436
  9,042
  9,671
  10,324
  11,005
  11,712
  12,448
  13,214
  14,012
  14,844
  15,711
  16,616
  17,560
  18,546
  19,576
  20,652
  21,777
  22,954
  24,185
Debt-to-equity ratio
  2.340
  2.440
  2.530
  2.600
  2.670
  2.720
  2.770
  2.820
  2.850
  2.890
  2.920
  2.950
  2.970
  2.990
  3.010
  3.030
  3.050
  3.060
  3.080
  3.090
  3.100
  3.110
  3.130
  3.130
  3.140
  3.150
  3.160
  3.170
  3.180
  3.180
Adjusted equity ratio
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  417
  475
  537
  601
  668
  739
  812
  889
  968
  1,051
  1,241
  1,331
  1,424
  1,520
  1,621
  1,725
  1,834
  1,947
  2,064
  2,187
  2,314
  2,448
  2,587
  2,732
  2,883
  3,041
  3,207
  3,379
  3,560
  3,749
Depreciation, amort., depletion, $m
  200
  206
  214
  221
  229
  237
  246
  255
  264
  273
  140
  151
  162
  173
  185
  197
  209
  223
  236
  251
  265
  281
  297
  314
  332
  350
  369
  389
  410
  432
Funds from operations, $m
  617
  682
  750
  822
  897
  976
  1,058
  1,143
  1,232
  1,325
  1,382
  1,482
  1,585
  1,693
  1,805
  1,922
  2,043
  2,169
  2,301
  2,437
  2,580
  2,729
  2,884
  3,046
  3,215
  3,391
  3,576
  3,769
  3,971
  4,182
Change in working capital, $m
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  55
  57
  60
  62
  65
  68
Cash from operations, $m
  597
  661
  728
  799
  873
  950
  1,031
  1,116
  1,203
  1,295
  1,351
  1,449
  1,552
  1,658
  1,769
  1,884
  2,004
  2,128
  2,258
  2,393
  2,534
  2,681
  2,834
  2,993
  3,160
  3,334
  3,516
  3,707
  3,906
  4,114
Maintenance CAPEX, $m
  -50
  -57
  -63
  -71
  -78
  -86
  -94
  -103
  -112
  -121
  -130
  -140
  -151
  -162
  -173
  -185
  -197
  -209
  -223
  -236
  -251
  -265
  -281
  -297
  -314
  -332
  -350
  -369
  -389
  -410
New CAPEX, $m
  -114
  -122
  -129
  -135
  -142
  -148
  -155
  -161
  -168
  -175
  -181
  -189
  -196
  -204
  -212
  -220
  -229
  -238
  -248
  -258
  -269
  -281
  -293
  -306
  -319
  -333
  -348
  -364
  -381
  -398
Cash from investing activities, $m
  -164
  -179
  -192
  -206
  -220
  -234
  -249
  -264
  -280
  -296
  -311
  -329
  -347
  -366
  -385
  -405
  -426
  -447
  -471
  -494
  -520
  -546
  -574
  -603
  -633
  -665
  -698
  -733
  -770
  -808
Free cash flow, $m
  432
  482
  536
  593
  653
  716
  783
  852
  924
  999
  1,039
  1,120
  1,205
  1,293
  1,384
  1,479
  1,578
  1,681
  1,787
  1,898
  2,014
  2,134
  2,260
  2,391
  2,527
  2,669
  2,818
  2,973
  3,135
  3,305
Issuance/(repayment) of debt, $m
  274
  290
  306
  321
  337
  352
  367
  383
  398
  414
  430
  447
  465
  483
  502
  522
  543
  565
  588
  613
  639
  666
  695
  725
  757
  791
  827
  864
  904
  945
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  274
  290
  306
  321
  337
  352
  367
  383
  398
  414
  430
  447
  465
  483
  502
  522
  543
  565
  588
  613
  639
  666
  695
  725
  757
  791
  827
  864
  904
  945
Total cash flow (excl. dividends), $m
  706
  772
  842
  914
  990
  1,068
  1,150
  1,234
  1,322
  1,413
  1,470
  1,568
  1,670
  1,776
  1,887
  2,002
  2,121
  2,246
  2,376
  2,511
  2,653
  2,800
  2,955
  3,116
  3,284
  3,460
  3,644
  3,837
  4,039
  4,250
Retained Cash Flow (-), $m
  -84
  -88
  -92
  -97
  -102
  -106
  -111
  -116
  -120
  -125
  -130
  -135
  -140
  -146
  -152
  -158
  -164
  -171
  -178
  -185
  -193
  -201
  -210
  -219
  -229
  -239
  -250
  -261
  -273
  -286
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  622
  684
  749
  817
  888
  962
  1,039
  1,119
  1,202
  1,288
  1,339
  1,433
  1,530
  1,630
  1,735
  1,844
  1,957
  2,075
  2,198
  2,326
  2,460
  2,599
  2,745
  2,897
  3,055
  3,221
  3,395
  3,576
  3,766
  3,965
Discount rate, %
  6.60
  6.93
  7.28
  7.64
  8.02
  8.42
  8.84
  9.29
  9.75
  10.24
  10.75
  11.29
  11.85
  12.45
  13.07
  13.72
  14.41
  15.13
  15.88
  16.68
  17.51
  18.39
  19.31
  20.27
  21.29
  22.35
  23.47
  24.64
  25.87
  27.17
PV of cash for distribution, $m
  583
  599
  607
  609
  604
  592
  574
  550
  520
  486
  436
  397
  357
  316
  275
  236
  199
  164
  134
  106
  83
  63
  47
  35
  25
  17
  11
  7
  5
  3
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Allegion Public Limited Company is a provider of security products and solutions. The Company offers a portfolio of mechanical and electronic security products across a range of brands. Its segments include Americas; Europe, Middle East, India and Africa (EMEIA), and Asia Pacific. Its products include door closers and controls; door and door frames (steel); electronic security products; electronic and biometric access control systems; exit devices; locks, locksets, portable locks and key systems; time, attendance and workforce productivity systems, and other accessories. It sells a range of security products and solutions for end users in commercial, institutional and residential facilities across the world, including into the education, healthcare, government, hospitality, commercial office and single and multi-family residential markets. As of December 31, 2016, it manufactured and sold mechanical and electronic security products and solutions in approximately 130 countries.

FINANCIAL RATIOS  of  Allegion plc (ALLE)

Valuation Ratios
P/E Ratio 39.3
Price to Sales 4
Price to Book 79.7
Price to Tangible Book
Price to Cash Flow 23.8
Price to Free Cash Flow 26.9
Growth Rates
Sales Growth Rate 8.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 22.9%
Cap. Spend. - 3 Yr. Gr. Rate 16.5%
Financial Strength
Quick Ratio 7
Current Ratio 0.1
LT Debt to Equity 1253.1%
Total Debt to Equity 1295.6%
Interest Coverage 6
Management Effectiveness
Return On Assets 12.1%
Ret/ On Assets - 3 Yr. Avg. 10.3%
Return On Total Capital 14.7%
Ret/ On T. Cap. - 3 Yr. Avg. 13.1%
Return On Equity 329.5%
Return On Equity - 3 Yr. Avg. 434.4%
Asset Turnover 1
Profitability Ratios
Gross Margin 44.1%
Gross Margin - 3 Yr. Avg. 42.4%
EBITDA Margin 18.7%
EBITDA Margin - 3 Yr. Avg. 16.8%
Operating Margin 15.2%
Oper. Margin - 3 Yr. Avg. 14.3%
Pre-Tax Margin 13.2%
Pre-Tax Margin - 3 Yr. Avg. 12%
Net Profit Margin 10.2%
Net Profit Margin - 3 Yr. Avg. 8.6%
Effective Tax Rate 21.7%
Eff/ Tax Rate - 3 Yr. Avg. 26.3%
Payout Ratio 20.1%

ALLE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ALLE stock intrinsic value calculation we used $2732 million for the last fiscal year's total revenue generated by Allegion plc. The default revenue input number comes from 0001 income statement of Allegion plc. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ALLE stock valuation model: a) initial revenue growth rate of 12.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.6%, whose default value for ALLE is calculated based on our internal credit rating of Allegion plc, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Allegion plc.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ALLE stock the variable cost ratio is equal to 79.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ALLE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Allegion plc.

Corporate tax rate of 27% is the nominal tax rate for Allegion plc. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ALLE stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ALLE are equal to 33.3%.

Life of production assets of 18.1 years is the average useful life of capital assets used in Allegion plc operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ALLE is equal to 5.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $651 million for Allegion plc - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 94.446 million for Allegion plc is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Allegion plc at the current share price and the inputted number of shares is $8.9 billion.

RELATED COMPANIES Price Int.Val. Rating
FBHS Fortune Brands 49.13 55.95  buy
NL NL Industries, 3.90 3.74  hold
HON Honeywell Inte 162.47 132.66  hold

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.