It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Allison Transmission Holdings (NYSE:ALSN). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Our free stock report includes 2 warning signs investors should be aware of before investing in Allison Transmission Holdings. Read for free now.

How Fast Is Allison Transmission Holdings Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Allison Transmission Holdings has managed to grow EPS by 27% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Allison Transmission Holdings maintained stable EBIT margins over the last year, all while growing revenue 3.9% to US$3.2b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.NYSE:ALSN Earnings and Revenue History May 19th 2025

Check out our latest analysis for Allison Transmission Holdings

Fortunately, we've got access to analyst forecasts of Allison Transmission Holdings' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Allison Transmission Holdings Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$8.9b company like Allison Transmission Holdings. But we are reassured by the fact they have invested in the company. With a whopping US$58m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

Story Continues

Is Allison Transmission Holdings Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Allison Transmission Holdings' strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Allison Transmission Holdings' continuing strength. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. It's still necessary to consider the ever-present spectre of investment risk.  We've identified 2 warning signs  with Allison Transmission Holdings , and understanding them should be part of your investment process.

Although Allison Transmission Holdings certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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