ALLE Allegion
Spec-driven lock franchise with pricing power; modestly beats the ~5% growth already priced in.
The business
Allegion makes locks, door hardware, exit devices, electronic access control and related products, under brands such as Schlage, LCN, Von Duprin and Interflex. Most profit comes from Americas non-residential buildings (schools, hospitals, offices), where architects specify its products and building codes require them. Replacement and retrofit demand on the installed base gives it a steady, recurring-like revenue stream.
Quality gate · 84/100
Moat & management
| Moat | wide moat |
| Source | switching costs |
| Trajectory | stable |
| Management | excellent |
Architects write its products into specs, locksmiths and integrators are trained on its systems, and code-compliant life-safety hardware is a small share of building cost, so customers stay and Allegion has pricing power. Master-key systems lock in the installed base for decades. The shift to electronic and cloud access lets software-native players compete, but Allegion is so far gaining from that shift.
They run disciplined bolt-on M&A in electronic access, keep a modest buyback that slowly shrinks the share count, and raise the dividend steadily; leverage stays conservative at about 1.6x. Acquisition integration has been mostly sensible, with no empire building.
Owner-earnings inputs
| Owner earnings (TTM) | 671.10M |
| Owner-earnings yield | 5.2% |
| Free-cash-flow yield | 5.2% |
| Growth used (normalized) | 6.5% |
| Market-implied growth (reverse DCF) | 4.8% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 9.0% |
Projected owner earnings
| Yr | Owner earnings | Growth | PV |
|---|---|---|---|
| 1 | 714.72M | 6.5% | 655.71M |
| 2 | 759.39M | 6.2% | 639.16M |
| 3 | 804.96M | 6.0% | 621.57M |
| 4 | 851.24M | 5.8% | 603.04M |
| 5 | 898.06M | 5.5% | 583.68M |
| 6 | 945.21M | 5.3% | 563.60M |
| 7 | 992.47M | 5.0% | 542.91M |
| 8 | 1.04B | 4.8% | 521.74M |
| 9 | 1.09B | 4.5% | 500.20M |
| 10 | 1.13B | 4.2% | 478.41M |
| 11 | 1.18B | 4.0% | 456.46M |
| 12 | 1.22B | 3.8% | 434.48M |
| 13 | 1.26B | 3.5% | 412.55M |
| 14 | 1.31B | 3.2% | 390.79M |
| 15 | 1.35B | 3.0% | 369.28M |
Key risks
- Cyclical non-residential construction and residential weakness compress volumes
- Electronic and cloud access lets tech-native rivals and platforms break the spec and installed-base lock-in
- Larger acquisitions to chase growth could dilute returns on capital
Catalysts
- Shift from mechanical to electronic locks raises dollar content per opening
- Ongoing price realization plus aftermarket replacement on the installed base
⚠ maintenance capex ≈ min(capex, D&A), capped at FCF · Price pays for ~5%/yr owner-earnings growth over 15y (reverse DCF); model credits 6%.