Graham Corporation has been on fire lately. In the past six months alone, the company’s stock price has rocketed 47.5%, reaching $43.27 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is it too late to buy GHM? Find out in our full research report, it’s free.

Why Are We Positive On GHM?

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 performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Thankfully, Graham Corporation’s 18.8% annualized revenue growth over the last five years was incredible. 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 full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.

3. Increasing Free Cash Flow Margin Juices Financials

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, Graham Corporation’s margin expanded by 15.3 percentage points over the last five years. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose by more than its operating profitability. Graham Corporation’s free cash flow margin for the trailing 12 months was 13.5%.

Final Judgment

These are just a few reasons why Graham Corporation ranks highly on our list, and with the recent rally, the stock trades at 23.6× forward EV-to-EBITDA (or $43.27 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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