In Monday’s trading, Argan (AGX), a provider of infrastructure and construction services, saw its stock move up 40 spots in Barchart’s Top 100 Stocks to Buy into the 59th spot.
As you can see from above, its weighted alpha is 172.77, considerably higher than AGX’s stock performance over the past 12 months. That typically means the stock has been accelerating in recent days — it’s up 26% over the last month alone.
Wall Street credit veteran Howard Marks thinks the non-Mag 7 stocks are overvalued. He said so in his August memo to clients.
“I think it’s the average p/e ratio of 22 on the 493 non-Magnificent companies in the index – well above the mid-teens average historical p/e for the S&P 500 – that renders the index’s overall valuation so high and possibly worrisome,” Marks’ Calculus of Value memo stated on Aug. 13.
Since Aug. 13, the S&P 500 has added another 3.7% and is now up 14% in 2025, and that’s after the November swoon.
I continue to like infrastructure-related stocks. I don’t see the demand for products and services in this area receding anytime soon.
According to S&P Global Market Intelligence, Argan’s expected to earn $8.41 a share in fiscal 2026 (January year-end) and $9.47 in 2027. Its shares trade at 39.3 times the 2027 estimate. That’s pricey.
However, there’s an argument to be made that now’s a good time to buy. Here’s why.
In mid-August, I highlighted Argan’s position within the top 100 stocks to buy. It was one of the 44 stocks in the top 100 that were profitable.
“The data center play has been on a tear since breaking out of a six-year stall in early 2024. Up 66% year-to-date and 387% since the beginning of 2024, Argan stock looks ready to take a break,” I wrote on Aug. 12.
Although I was concerned about the stock’s valuation, I stated that “If you’re prepared for a long-term hold with Argan, I don’t think it’s too late to buy its stock. Your patience will be rewarded.”
AGX stock is up 55% over the past three months. That’s a big move in a short period for a stock that hadn’t done anything between 2016 and the end of 2023.
The backlog has grown. In fiscal 2017, Argan’s backlog was $1.0 billion or 1.48 times annual revenue. In 2025, it was $1.4 billion, or 1.60 times annual revenue.
On the one hand, that’s not a significant amount of revenue growth—3.3% compounded annually over eight years. Further, its annual revenue dropped to $239 million in fiscal 2020, although not because of COVID.
The company’s Gemma Power Systems subsidiary secured several large contracts to build power plants between January 2019 and January 2020. However, which is not unusual with large EPC (engineering, procurement and construction) contracts, they were delayed into 2020.
From the end of fiscal 2020 through fiscal 2025, the CAGR (compound annual growth rate) for revenue was 29.6%, nearly 1o times the growth from 2017 through 2020.
As a result of the accelerated growth, its EBITDA margins have nearly recovered from their 2016 high of 18.3%. In 2025, they were 10.4%. In the trailing 12 months ended July 31, 2025, they were 13%. Through the first six months of 2026, the EBITDA margin was 15.4%, 590 basis points higher.
With a $2 billion backlog at the end of July, it’s got about two years of work ahead of it. Should margins continue to grow, as the company expects, its profitability will hit record levels.
“Our pipeline is stronger than it has ever been, and since 02/2008, we have increased our tangible book value and cumulative dividends per share to record levels,” stated CEO David Watson in Argan’s Q2 2026 conference call.
Watson also said that GPS and APC (Atlantic Projects Company), the two subsidiaries that are its Power Industry Services segment (83% of revenue), can handle up to 12 power-related projects with the current employee headcount.
The company finished the second quarter with $572 million in cash on its balance sheet and no debt. Its Altman Z-Score as of July 31 was 4.92, the highest it’s been since Q4 2019. Financially, it’s as solid as it’s ever been.
However, there’s no getting away from its frothy valuation.
Currently, its enterprise value of $4.57 billion is 31.5 times its EBITDA. The multiple hasn’t been higher at any time in the past decade.
Does this mean you shouldn’t consider buying its stock? Maybe.
It really depends on your intentions for the stock. If it’s going to be a core holding for the next decade, you could justify buying at these prices to ensure you don’t procrastinate yourself out of owning an excellent investment.
On the other hand, most of the market is overpriced right now, which means a correction will take AGX down with it, no matter how great a company it is.
The company reports Q3 2026 results on Dec. 4. I would wait until after the report to decide what to do. Time is your friend in this instance.
I like the stock, but the valuation worries me.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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