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

We came across a bullish thesis on Allison Transmission Holdings, Inc. on Value Don’t Lie’s Substack. In this article, we will summarize the bulls’ thesis on ALSN. Allison Transmission Holdings, Inc.’s share was trading at $114.20 as of February 4th. ALSN’s trailing and forward P/E were 13.53 and 11.32 respectively according to Yahoo Finance.

Allison Transmission Holdings, Inc., together with its subsidiaries, designs, manufactures, and sells fully automatic transmissions for medium- and heavy-duty commercial vehicles and medium- and heavy-tactical U.S. defense vehicles, and electrified propulsion systems worldwide. ALSN is undergoing a strategic shift following its January 2026 acquisition of Dana’s off-highway business, reframing the investment case around long-term mix improvement rather than near-term cyclicality.

Historically, ALSN has been a highly profitable but slow-growing, cyclical business, dominating the medium- and heavy-duty automatic transmission market with roughly 80% share in buses and Class 6–8 trucks. Despite mid-30% EBITDA margins and 20%+ free cash flow margins—well above typical auto suppliers—the stock has consistently traded at discounted multiples due to modest growth, frequent cyclical downturns, customer concentration, and long-term EV disruption risks.

The Dana acquisition directly addresses several of these concerns by materially expanding ALSN’s exposure to off-highway end markets, international geographies, and axle, gear, and gearbox products, while positioning the company to develop competitive e-axle solutions as electrification advances.

On a pro-forma basis, ALSN now represents a roughly $6 billion revenue business generating $1.45 billion of EBITDA before synergies, with management targeting $120 million of cost synergies by 2027. While the acquired Dana business currently operates at lower margins and is experiencing cyclical weakness, it carries lower capital intensity and was purchased at a reasonable EBITDA multiple.

Combined free cash flow is estimated at approximately $8.60 per share in 2025, rising meaningfully as synergies are realized, leverage is reduced toward a 2.0x target, and aggressive share repurchases resume. Given ALSN’s long history of buybacks—having retired more than 65% of shares since its IPO—capital allocation remains a key driver of per-share value. At current trading multiples, the stock offers a balanced risk/reward, with meaningful upside if synergies and deleveraging play out, but downside protection supported by strong cash generation.

Previously, we covered a bullish thesis on Gentex Corporation (GNTX) by The Antifragile Investor in January 2025, which highlighted the company’s leadership in electrochromic mirrors, innovation-driven product expansion, diversification initiatives, and strong financial position. GNTX’s stock price has depreciated by approximately 10.25% since our coverage. Value Don’t Lie shares a similar view but emphasizes Allison Transmission’s acquisition-led transformation and capital allocation focus.

Allison Transmission Holdings, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 44 hedge fund portfolios held ALSN at the end of the third quarter which was 37 in the previous quarter. While we acknowledge the risk and potential of ALSN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ALSN and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.