Financial Analysis: Allison Transmission (NYSE:ALSN) and Garrett Motion (NYSE:GTX)

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Allison Transmission (NYSE:ALSN) and Garrett Motion (NYSE:GTX) are both auto/tires/trucks companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, profitability, dividends, analyst recommendations, valuation, institutional ownership and risk.

Analyst Ratings

This is a summary of recent ratings and price targets for Allison Transmission and Garrett Motion, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Allison Transmission 2 4 3 0 2.11
Garrett Motion 2 4 1 0 1.86

Allison Transmission currently has a consensus target price of $48.38, suggesting a potential upside of 1.84%. Garrett Motion has a consensus target price of $14.33, suggesting a potential upside of 16.44%. Given Garrett Motion’s higher possible upside, analysts clearly believe Garrett Motion is more favorable than Allison Transmission.

Valuation and Earnings

This table compares Allison Transmission and Garrett Motion’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Allison Transmission $2.71 billion 2.11 $639.00 million $4.78 9.94
Garrett Motion $3.38 billion 0.27 $1.18 billion $4.05 3.04

Garrett Motion has higher revenue and earnings than Allison Transmission. Garrett Motion is trading at a lower price-to-earnings ratio than Allison Transmission, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

93.4% of Allison Transmission shares are owned by institutional investors. Comparatively, 84.2% of Garrett Motion shares are owned by institutional investors. 9.0% of Allison Transmission shares are owned by company insiders. Comparatively, 0.4% of Garrett Motion shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

Allison Transmission pays an annual dividend of $0.60 per share and has a dividend yield of 1.3%. Garrett Motion does not pay a dividend. Allison Transmission pays out 12.6% of its earnings in the form of a dividend.

Profitability

This table compares Allison Transmission and Garrett Motion’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Allison Transmission 24.06% 96.05% 15.33%
Garrett Motion 34.50% -44.81% 50.86%

Summary

Allison Transmission beats Garrett Motion on 9 of the 15 factors compared between the two stocks.

Allison Transmission Company Profile

Allison Transmission Holdings, Inc., together with its subsidiaries, designs, manufactures, and sells commercial and defense fully-automatic transmissions for medium- and heavy-duty commercial vehicles, and medium- and heavy-tactical U.S. defense vehicles worldwide. It offers 12 transmission product lines for various applications, including distribution, refuse, construction, fire, and emergency on-highway trucks; school, transit, and hybrid-transit buses; motor homes; energy, mining, and construction off-highway vehicles and equipment; and wheeled and tracked defense vehicles. The company markets its transmissions under Allison Transmission brand name; and remanufactured transmissions under ReTran brand name. It also sells branded replacement parts, support equipment, and other products necessary to service the installed base of vehicles utilizing its transmissions, as well as defense kits, engineering services, and extended transmission coverage services to various original equipment manufacturers, distributors, and the U.S. government. As of February 28, 2019, the company served customers through an independent network of approximately 1,400 independent distributor and dealer locations. The company was formerly known as Clutch Holdings, Inc. Allison Transmission Holdings, Inc. was founded in 1915 and is headquartered in Indianapolis, Indiana.

Garrett Motion Company Profile

Garrett Motion Inc. designs, manufactures, and sells turbocharger and electric boosting technologies for light and commercial vehicle original equipment manufacturers and the aftermarket worldwide. The company offers light vehicle gasoline and diesel, and commercial vehicle turbochargers. Its integrated vehicle health management tools detect intermittent faults and anomalies to provide understanding of the real-time health of a vehicle system. The company offers its products through distribution networks. Garrett Motion Inc. was incorporated in 2018 and is headquartered in Rolle, Switzerland.

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