The Bearish Case for Allegion
A key support level has formed in the chart of Allegion Plc (ALLE). If this level is broken, a breakdown is expected.
ALLE is a leading global provider of security products and solutions sold under leading brands, such as Schlage, Von Duprin, and LCN. It offers an extensive portfolio of mechanical and electronic security products, including doors and door systems, electronic security products, biometric and mobile access control systems, locks, locksets, and more.
The company is benefiting from strength in its electronic products business and a large customer base. It is seeing strong demand for its Schlage and Interflex branded products. Plus, management has implemented cost-control measures to help its bottom-line. But the company is seeing lower overall demand due to the pandemic and weakness across its non-residential markets.
ALLE had no short-term debt as of the end of September and $1.4 billion in long-term debt. Its cash balance at the end of the quarter was $429 million. The company has a net margin of 11.1% and a high return on equity of 36.6%.
The company reported its latest earnings last week and EPS came in at $1.67. This was better than expectations and a year over year increase of 13.6%. Revenue for the quarter was $728.40 million, which also beat expectations, but was down 2.7% year over year.
ALLE has a fair valuation with a trailing P/E of 30.3 and a forward P/E of 22.4. The company has shown bearish momentum over the near, mid and long-term, which has resulted in a grade of “D” the Trade Grade component of our POWR Ratings system.
For more insight into its price action, take a look at the 1-year chart of ALLE below with added notations:
Chart of ALLE provided by TradingView
ALLE has formed an important level of support at $95 (green) over the past several months. The stock has consistently managed to rally off the mark.
However, if the $95 support were to break, lower prices should follow for ALLE. Therefore, a trader could enter a short position in the stock were to break below the $95 support level.
Have a good trading day!
Good luck!
Christian Tharpe, CMT
ALLE shares were trading at $97.63 per share on Friday morning, down $0.48 (-0.49%). Year-to-date, ALLE has declined -20.88%, versus a 3.72% rise in the benchmark S&P 500 index during the same period.
Author: Christian Tharp, CMT