What a fantastic six months it’s been for Graham Corporation. Shares of the company have skyrocketed 50.2%, hitting $106.59. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now still a good time to buy GHM? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Is Graham Corporation a Good Business?
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
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Graham Corporation grew its sales at an incredible 20.3% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers.
2. Operating Margin Rising, Profits Up
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.
Graham Corporation’s operating margin rose by 13.5 percentage points over the last five years, as its sales growth gave it immense operating leverage. Its operating margin for the trailing 12 months was 5.6%.
3. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Graham Corporation’s EPS grew at 42.3% compounded annual growth rate over the last five years, higher than its 20.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
These are just a few reasons why Graham Corporation is a cream-of-the-crop industrials company, and with the recent rally, the stock trades at 57.5× forward P/E (or $106.59 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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