Investment Thesis
Despite exceptional 3371.7% YoY revenue growth, Allison Transmission exhibits concerning fundamental deterioration with net income declining 14.8% and EPS down 11.8%, signaling severe margin compression or one-time charges. The company carries elevated leverage (2.23x D/E) with weak capital returns (ROE 5.9%, ROA 1.3%) and modest free cash flow generation relative to $4.2B debt burden, creating financial distress risk.
Strengths
- Positive free cash flow of $103M with 7.3% FCF margin supports debt servicing
- Adequate liquidity with 1.85x current ratio and $311M cash position
- Operating margin of 13.9% remains reasonable for automotive parts sector
Risks
- Net income collapsed 14.8% YoY despite massive revenue growth indicating severe margin compression or extraordinary charges
- Excessive leverage at 2.23x D/E with $4.2B long-term debt against $1.9B equity; interest coverage ratio unavailable suggesting elevated concern
- Abysmal return metrics (ROE 5.9%, ROA 1.3%) indicate capital inefficiency and poor shareholder value generation
Key Metrics to Watch
- Net income trend and underlying causes of earnings decline relative to revenue growth
- Debt reduction progress and interest coverage ratio trajectory
- Return on equity improvement and free cash flow sustainability
Financial Metrics
Revenue
1.4B
Net Income
112.0M
EPS (Diluted)
$1.33
Free Cash Flow
103.0M
Total Assets
8.7B
Cash
311.0M
Profitability Ratios
Gross Margin
28.9%
Operating Margin
13.9%
Net Margin
8.0%
ROE
5.9%
ROA
1.3%
FCF Margin
7.3%
Balance Sheet & Liquidity
Current Ratio
1.85x
Quick Ratio
1.18x
Debt/Equity
2.23x
Debt/Assets
78.1%
Interest Coverage
N/A
Long-term Debt
4.2B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-08T07:53:09.062782 |
Data as of: 2026-03-31 |
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