Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Position Status | Return(%)* |
|---|---|---|---|---|---|---|---|---|
| 22 Aug, 25 | GHM | Buy | USD 48.7 | USD 51.62 | USD 53.8 | 25 days | Closed |
10.47%
|
*Return(%) represent the percentage change between the entry price and exit price of the recommendation.
Data Powered by EOD Historical Data (“EODHD”).
Graham Corporation, together with its subsidiaries, designs and manufactures fluid, power, heat transfer, and vacuum equipment for chemical and petrochemical processing, defense, space, petroleum refining, cryogenic, energy, and other industries. It offers power plant systems, including ejectors and surface condensers; torpedo ejection, propulsion, and power systems, such as turbines, alternators, regulators, pumps, and blowers; and thermal management systems comprising pumps, blowers, and drive electronics for defense sector. The company also provides rocket propulsion systems consisting of turbopumps and fuel pumps; cooling systems, which include pumps, compressors, fans, and blowers; and life support systems that comprise fans, pumps, and blowers for space industry. In addition, it offers heat transfer and vacuum systems, including ejectors, process and surface condensers, liquid ring pumps, heat exchangers, and nozzles; power generation systems, such as turbines, generators, compressors, and pumps; and thermal management systems comprising pumps, blowers, and electronics for energy sector. Further, the company offers heat transfer and vacuum systems consisting of ejectors, process and surface condensers, liquid ring pumps, heat exchangers, and nozzles for chemical and petrochemical processing industry. The company also services and sells spare parts for its equipment. It sells its products directly in the United States, the Middle East, Canada, Asia, South America, and internationally. Graham Corporation was founded in 1936 and is headquartered in Batavia, New York.
Earnings Expansion: Net income rose 55% YoY, from USD 3.0 million in Q1 FY25 to USD 4.6 million in Q1 FY26, while EPS increased from USD 0.27 to USD 0.42
Revenue Growth: Net sales increased 11% YoY, from USD 49.9 million in Q1 FY25 to USD 55.5 million in Q1 FY26
Operating Cash Flow Usage: The company used USD 2.3 million in operating cash in Q1 FY26, compared to stronger cash positions previously, driven by bonus and acquisition earnout payments
Cash Decline: Cash and equivalents fell from USD 21.6 million at FY25 year-end to USD 10.8 million at Q1 FY26, reflecting a 50% decrease
Graham faces concentrated exposure to the defense sector—accounting for 87% of backlog—which, while providing visibility, creates dependency on government contracts and vulnerability to policy or budgetary shifts
| Entry Price | Support* | Target 1** | Target 2** |
|---|---|---|---|
| 48.7 | 46.1 | 51.62 | 53.8 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
**Target prices may vary by ±0.5% depending on market volatility.
Strong Revenue and Profit Growth: Graham Corporation reported first-quarter fiscal 2026 revenues of USD 55.5 million, reflecting an 11% increase compared to USD 50.0 million in the prior-year period. This performance was supported by strong contributions from the Energy & Process markets, with notable growth in chemical/petrochemical and new energy industries, as well as sustained aftermarket demand. Orders in the quarter surged to USD 125.9 million, significantly outpacing sales and resulting in a robust book-to-bill ratio of 2.3x.
Margin Expansion and Earnings Improvement: Gross profit for the quarter rose 19% to USD 14.7 million, with gross margin expanding by 170 basis points to 26.5%. Operating income increased 54% to USD 5.0 million, driving operating margin improvement from 6.5% to 8.9%. Net income grew 55% year-over-year to USD 4.6 million, with diluted earnings per share advancing 56% to USD 0.42. Adjusted metrics also showed strength, as adjusted net income climbed 38% and adjusted EBITDA rose 33% to USD 6.8 million, with margins improving by 200 basis points to 12.3%.
Defense Orders Bolster Backlog: The company secured major defense-related orders, including USD 86.5 million for the Virginia Class submarine program and USD 25.5 million for the MK48 Mod 7 Heavyweight Torpedo program. These wins pushed backlog to USD 482.9 million, a 22% increase over the prior year. Approximately 87% of the backlog is tied to defense, providing long-term revenue visibility. About 35–40% of the backlog is expected to convert within the next twelve months.
Investments Driving Operational Efficiency: Graham continued to prioritize high-return capital investments aimed at strengthening operational capacity and profitability. Projects included automated welding systems, enhanced radiographic testing technologies, and a newly established cryogenic testing facility in Florida. These initiatives are designed to generate returns above 20% while improving efficiency and expanding opportunities in growth markets. Additionally, the company recently completed an expansion of its Batavia defense facility to support increasing demand.
Financial Position and Liquidity: As of June 30, 2025, Graham maintained a debt-free balance sheet with USD 10.8 million in cash and access to USD 44.3 million under its revolving credit facility. Cash used in operations was USD 2.3 million, primarily reflecting fiscal 2025 bonus payouts and acquisition-related earnout payments. Capital expenditures of USD 7.0 million were focused on capacity expansion and productivity improvements, with all major projects progressing on schedule.
Market and Tariff Dynamics: While performance benefitted from strong demand, the company acknowledged potential headwinds from increased tariffs. Management estimated an annualized impact of USD 2 million to USD 5 million for fiscal 2026. Nonetheless, aftermarket sales across both Energy & Process and Defense segments rose 33% year-over-year, highlighting resilient demand drivers. The company also noted its increasing participation in emerging energy markets such as hydrogen and small modular reactors.
Fiscal 2026 Outlook: Management reiterated its fiscal 2026 guidance, projecting net sales between USD 225 million and USD 235 million and gross margins between 24.5% and 25.5%. Adjusted EBITDA is expected in the range of USD 22 million to USD 28 million, with capital expenditures forecast at USD 15 million to USD 18 million. Graham remains on track to achieve its strategic target of 8–10% annual organic revenue growth and low to mid-teen adjusted EBITDA margins by fiscal 2027.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on Graham Corporation (NYSE: GHM) at the closing market price of USD 48.70, as on August 21, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Industrials Industry: Specialty Industrial Machinery
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| GHM Graham Corporation |
-2.745 4.24% | 61.98 | 72.69 | 59.17 | 1.15 | 2.01 | 1.11 | 18.92 |
| SIEGY Siemens AG ADR |
-3.15 2.26% | 136.21 | 17.07 | 15.75 | 1.88 | 2.76 | 2.37 | 11.38 |
| SMAWF Siemens AG Class N |
-10.9 3.84% | 273.00 | 16.98 | 15.53 | 1.83 | 2.72 | 2.35 | 11.32 |
| GE GE Aerospace |
-5.18 1.73% | 293.55 | 12.87 | 26.60 | 1.61 | 4.69 | 1.61 | 8.43 |
| SBGSY Schneider Electric SA |
-1.95 3.46% | 54.41 | 25.90 | 20.92 | 3.12 | 3.98 | 3.50 | 17.37 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is August 21,2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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