Graham Corporation has been on fire lately. In the past six months alone, the company’s stock price has rocketed 55%, reaching $96.70 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is it too late to buy GHM? Find out in our full research report, it’s free.
Why Are We Positive On Graham Corporation?
Founded when its founder patented a unique design for a vacuum system used in the sugar refining process, Graham (NYSE: GHM) provides vacuum and heat transfer equipment for the energy, petrochemical, refining, and chemical sectors.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Graham Corporation grew its sales at an incredible 20.1% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Graham Corporation’s EPS grew at 42% compounded annual growth rate over the last five years, higher than its 20.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Graham Corporation’s margin expanded by 15.4 percentage points over the last five years. We have no doubt shareholders would like to continue seeing its cash conversion rise as it gives the company more optionality. Graham Corporation’s free cash flow margin for the trailing 12 months was negative 2.6%, and continued increases could help it achieve long-term cash profitability.
Final Judgment
These are just a few reasons why we're bullish on Graham Corporation, and with the recent surge, the stock trades at 53.6× forward P/E (or $96.70 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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