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

We came across a bullish thesis on Allison Transmission Holdings, Inc. on Value investing subreddit by Live-Protection9305. In this article, we will summarize the bulls’ thesis on ALSN. Allison Transmission Holdings, Inc.’s share was trading at $87.76 as of September 2^nd. ALSN’s trailing and forward P/E were 10.02 and 9.32 respectively according to Yahoo Finance.

Allison Transmission Holdings, Inc. (ALSN) presents a compelling value opportunity, currently trading below intrinsic value at 2.7x revenue, 8.0x EBITDA, and 9x P/E. Headquartered in Indianapolis, the company is a leading designer and manufacturer of vehicle propulsion solutions for commercial and defense vehicles, with fully automatic transmissions widely used in medium- and heavy-duty trucks, buses, off-highway vehicles, and military applications.

Despite a decline in its core on-highway segment revenue from $456 million in Q2 2024 to $417 million in Q2 2025, other segments, particularly defense-related revenues, grew 47%, while earnings improved due to modest reductions in COGS, SG&A, and R&D expenses. The company carries significant leverage, roughly 60% of enterprise value, but most debt is long-dated with below-market interest rates, providing financial flexibility amid a high-interest-rate environment.

Allison plans to acquire Dana Incorporated (DAN) by Q4 2025, combining cash and debt to expand its international footprint, enhance product offerings, and generate synergies that should bolster cash flows over the medium term. While near-term earnings may face headwinds from integration costs and higher interest expense, these impacts are expected to be limited to FY25 and part of FY26. A simple DCF indicates an equity value of approximately $12.8 billion, implying potential upside of roughly 75%.

The company’s durable competitive advantages reinforce its investment case. Proprietary transmission technologies, strong brand equity, long-standing OEM integration, and a global aftermarket network create high switching costs and recurring revenue streams. Multi-year defense contracts further add regulatory and contractual moats, limiting competition. Combined, these factors provide Allison with a defensible market position and resilient cash flows, supporting both near-term stability and long-term value creation, particularly as the Dana acquisition enhances scale and global reach.

Previously we covered a bullish thesis on Gentex Corporation by The Antifragile Investor in January 2025, which highlighted its leadership in automotive technology, innovation in electrochromic mirrors, and diversification into aviation and smart home safety. The company’s stock has been trading flat since our coverage. The thesis still stands given Gentex’s strong financials and growth potential. Live-Protection9305 shares a similar focus but emphasizes Allison Transmission’s proprietary propulsion technologies, defense contracts, and strategic Dana acquisition.

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Disclosure: None.