GRANITE CONSTRUCTION INC (NYSE:GVA): An Undervalued Stock with Strong Fundamentals

The search for undervalued companies with good basic financial traits is a key part of value investing, a method created by Benjamin Graham and famously used by Warren Buffett. This method involves finding stocks that are priced below their calculated worth, offering a possible "margin of safety" for investors. One way to find these chances is by looking for companies that rate well on price measures while also showing acceptable health, earnings, and expansion. This mix points to a business that is not only priced well but is also operationally stable, possibly presenting an interesting risk-reward situation for long-term investors.

Valuation Measures

A main draw for value investors is discovering a stock that the market values lower than similar companies and its own future profit potential. The basic financial review for GRANITE CONSTRUCTION INC (NYSE:GVA) points out several points where it seems to be priced low.

• Its Price/Earnings (P/E) ratio of 20.91 is viewed as more affordable than 81% of similar companies in its field.
• The forward P/E ratio, using predicted future profits, is 16.67, which is more affordable than about 89% of the construction and engineering field.
• The stock also displays good value based on its Enterprise Value to EBITDA and Price/Free Cash Flow ratios, doing better than a large portion of its rivals in these areas.

For a value investor, these measures are important because they help spot a possible difference between the market price and the company's true worth. A low price, when combined with good operational traits, can point to a chance to buy.

Financial Stability

A company's financial stability is very important in value investing, as it shows the firm's capacity to handle economic slowdowns and keep running without high risk. A weak financial position can make an apparent good deal into a poor investment. GVA's financial stability is graded as acceptable, with several good signs.

• The company has an Altman-Z score of 3.47, showing financial stability and a low short-term chance of failure, doing better than 60% of its field.
• Its Debt to Free Cash Flow ratio is a good 2.40, suggesting it could repay its debts fairly fast, a measure better than 70% of similar companies.
• While its debt/equity ratio is average, the review states the company has very little debt, reducing worries about borrowing.

This good financial base offers the steadiness value investors look for, making sure the company is not weighed down by debt and has the resources to handle difficult times.

Earnings and Expansion

An undervalued stock becomes much more appealing if the company is also earning money and getting larger. A low P/E ratio is less interesting if it comes from falling profits. GVA shows a positive mix of getting better at earning money and good expansion, which might help reduce the price difference in the future.

• The company's Profit Margin has gotten better in the last few years and, at 3.89%, is in the top half of its field.
• Earnings Per Share (EPS) have increased by a notable 59.63% over the last year and have a good average yearly growth rate of 32.75% over recent years.
• In the future, experts predict EPS to grow by 21.70% on average each year, along with a quite good sales growth of 9.43%.

This combination is uncommon and strong. It implies that the market might be setting a low price on a company that is not just financially stable but is also showing and is predicted to keep showing good profit increases. For a value investor, this expansion offers a reason that could push the stock price nearer to its true worth.

Conclusion

GRANITE CONSTRUCTION INC shows a picture that fits with the ideas of value investing. It sells at a price that is interesting compared to its field, has a good financial base that lowers risk, and is supported by good and predicted future earnings and expansion. This coming together of factors, a low-priced stock in a financially stable, expanding company, makes GVA a notable option for investors using a value-focused method. A full list of these basic financial grades can be seen in the full basic financial review.

Investors searching for similar chances can use set searches to sort the market for stocks that match certain basic financial rules. You can find more stocks that match this "Acceptable Value" description by using the pre-set stock screener.

Disclaimer: This article is for information only and is not financial advice, a suggestion to buy or sell any security, or a support of any investment plan. All investments carry risk, including the potential loss of your original investment. You should do your own research and talk to a qualified financial advisor before making any investment choices.