Core Thesis - Allison Transmission Holdings, Inc. is viewed as a compelling value opportunity, trading below intrinsic value with a P/E ratio of 9x, EBITDA of 8.0x, and revenue multiple of 2.7x [2] Financial Performance - The company's core on-highway segment revenue declined from $456 million in Q2 2024 to $417 million in Q2 2025, while defense-related revenues grew by 47% [3] - Earnings improved due to modest reductions in cost of goods sold (COGS), selling, general and administrative (SG&A) expenses, and research and development (R&D) expenses [3] Debt and Financial Flexibility - Allison carries significant leverage, with approximately 60% of enterprise value in debt, but most of this debt is long-dated with below-market interest rates, providing financial flexibility in a high-interest-rate environment [3] Strategic Acquisition - The company plans to acquire Dana Incorporated by Q4 2025, using a combination of cash and debt to expand its international footprint and enhance product offerings [4] - The acquisition is expected to generate synergies that will bolster cash flows over the medium term, despite potential near-term headwinds from integration costs and higher interest expenses [4] Competitive Advantages - Allison's durable competitive advantages include proprietary transmission technologies, strong brand equity, long-standing OEM integration, and a global aftermarket network, which create high switching costs and recurring revenue streams [5] - Multi-year defense contracts further enhance regulatory and contractual moats, limiting competition and providing a defensible market position [5] Valuation Potential - A simple discounted cash flow (DCF) analysis indicates an equity value of approximately $12.8 billion, suggesting a potential upside of roughly 75% [4]