Graham Corporation: Slightly Weak Results But Overreaction Creates A Buying Opportunity.

2025-02-20 08:54:44 ET

Summary

• Graham Corporation's stock fell ~9% post-earnings, underperforming the S&P 500, but I maintain a buy rating due to widened return expectation and margin of safety.
• 3Q25 results showed a topline miss but better-than-expected bottom-line; order intake dropped significantly due to lumpy nature and tough prior-year comparison.
• Gross margins improved by 260 bps, though higher SG&A costs offset adjusted EBITDA leverage; long-term margin expansion remains on target.
• Fundamentals remain intact, and the stock's price correction offers a better entry point. According to my estimates, the GHM stock price has a FY27 target of $60 per share.

Introduction

I initiated a buy rating on Graham Corporation ( GHM ) last month and since then, the stock has underperformed the S&P 500 index by falling ~9% as compared to the S&P 500 increasing ~6% at the same time. Although the stock was trending up post my initial coverage, it tanked post the earnings announcement on February 7, 2025....

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