Over the past six months, Granite Construction’s stock price fell to $112.54. Shareholders have lost 11.5% of their capital, which is disappointing considering the S&P 500 has climbed by 12.8%. This might have investors contemplating their next move.
Following the drawdown, is now the time to buy GVA? Find out in our full research report, it’s free.
Why Are We Positive on GVA?
Having played a role in the construction of the Hoover Dam, Granite Construction (NYSE: GVA) is a provider of infrastructure solutions for roads, bridges, and other projects.
1. Long-Term Revenue Growth Shows Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Granite Construction grew its sales at a decent 7.7% compounded annual growth rate. Its growth was slightly above 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.
Granite Construction’s EPS grew at 23.6% compounded annual growth rate over the last five years, higher than its 7.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Granite Construction’s margin expanded by 14.6 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 more than its operating profitability. Granite Construction’s free cash flow margin for the trailing 12 months was 9.5%.
Final Judgment
These are just a few reasons why we think Granite Construction is a great business. After the recent drawdown, the stock trades at 15.4× forward P/E (or $112.54 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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