Granite Construction Inc (NYSE:GVA) has appeared as a possible option for investors using a value investing strategy. This method, created by Benjamin Graham and later refined by Warren Buffett, centers on finding companies trading for less than their inherent value while having good basic qualities. The system looks for securities with good valuation numbers together with acceptable profitability, financial condition, and growth outlook, forming a measured way to value investing that steers clear of possible value traps.
Valuation Assessment
Granite Construction shows good valuation numbers that match value investing ideas. The company's valuation score of 7/10 shows several appealing price features next to industry counterparts:
- Enterprise Value to EBITDA ratio shows GVA is less expensive than 83.64% of construction and engineering companies
- Price to Free Cash Flow ratio is better than 85.45% of industry rivals
- Forward P/E ratio of 16.13 looks good next to industry average of 29.28
- PEG ratio shows acceptable valuation when including estimated growth
These valuation numbers are important for value investors looking for a margin of safety, the cushion between market price and inherent value that guards against calculation mistakes. The company's present valuation implies the market might be pricing its future earnings potential too low.
Financial Health and Stability
With a health score of 6/10, Granite Construction shows sufficient financial steadiness, a necessary factor for value investors who usually keep positions for long times. The company keeps:
- Altman-Z score of 3.40, showing low bankruptcy chance
- Debt to FCF ratio of 2.40 years, doing better than 72.73% of industry counterparts
- Current ratio of 1.57 and quick ratio of 1.45, giving liquidity assurance
- Careful debt management even with a neutral debt-to-equity ratio
This financial base lowers the chance of permanent capital loss, a main worry in value investing. The company's capacity to handle debts and continue operations during economic shifts supports the long-term investment idea.
Profitability Metrics
Granite Construction gets a profitability score of 6/10, showing steady earning ability, another key part of value investing. The company shows:
- Return on Equity of 14.91%, doing better than 69.09% of industry rivals
- Profit margin of 3.89% that has had recent gains
- Positive operating cash flow during the last five years
- Increasing gross margins showing operational effectiveness
These profitability signs suggest the company has economic strengths that can maintain earnings over time, a vital element in Benjamin Graham's investment thinking. The gaining margin patterns show management's skill in handling competitive forces.
Growth Trajectory
The company's growth score of 7/10 mixes both past results and future estimates:
- EPS growth of 59.63% over the last year
- Five-year average EPS growth of 32.75%
- Estimated future EPS growth of 21.70% each year
- Planned revenue growth of 9.43% per year
This growth picture is especially notable given the company's acceptable valuation. Value investors often look for companies where growth estimates are not completely shown in the present stock price, making chance for price gains as growth happens.
Investment Considerations
Granite Construction works in the infrastructure and materials field, gaining from long-term supports including government infrastructure spending and private construction work. The company's two parts, construction and materials, give variety across project kinds and geographic areas. While the construction industry deals with cyclical pressures, the company's financial control and operational knowledge place it to handle industry cycles well.
The mix of acceptable valuation, good financial condition, steady profitability, and solid growth makes a notable profile for value-focused investors. The company's detailed fundamental analysis shows a business that might be trading below its inherent value while keeping the basic strength needed for long-term success.
For investors looking for similar chances, more screening results can be seen using this Decent Value Stocks screen that finds companies with good valuation features together with acceptable basic numbers.
This analysis is for information only and does not form investment advice, suggestion, or support of any security. Investors should do their own research and talk with financial advisors before making investment choices. Past results do not ensure future outcomes, and all investments have risk including possible loss of principal.
