GRAHAM CORP (GHM) Stock Analysis
GRAHAM CORP (GHM) Stock Analysis
Overall Grade: F (Concerning)
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GRAHAM CORP faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 14.3% | Solid returns |
| FCF Margin | -2.6% | Cash flow pressure |
| Debt/Equity | 0.0x | Conservative leverage |
Investment Thesis: Financial metrics indicate concerning business quality with areas requiring attention.
What is GRAHAM CORP's Profitability and ROIC?
GRAHAM CORP's return on invested capital of 14.3% is around industry norms. Gross margin of 24.6% with operating margin at 7.5% reflects the company's moderate market position.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 14.3% | Good | Adequate returns |
| Return on Equity (ROE) | 12.1% | Adequate | Moderate equity returns |
| Gross Margin | 24.6% | Adequate | Competitive pricing environment |
| Operating Margin | 7.5% | Adequate | Moderate operational efficiency |
How Strong is GRAHAM CORP's Cash Flow Quality?
GRAHAM CORP generated $-6.1M in free cash flow over the trailing twelve months, representing a -2.6% margin. FCF was positive in N/A of the last 8 quarters, indicating variable cash generation.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | -2.6% | Red flag | Thin cash margins |
| Free Cash Flow (TTM) | $-6.1M | Red flag | Cash burn |
| OCF/Net Income | 0.8x | Good | Potential accrual concerns |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is GRAHAM CORP's Financial Health?
GRAHAM CORP's debt-to-equity ratio of 0.0x indicates conservative leverage.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Debt to Equity | 0.0x | Excellent | Conservative capital structure |
Is GRAHAM CORP Stock Overvalued or Undervalued?
GRAHAM CORP trades at a P/E of 47.2x, representing a premium to the sector median of N/A. Free cash flow yield of -0.9% reflects market expectations for growth.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 47.2x | Adequate | Premium valuation |
| EV/Sales | 2.1x | Good | Attractive revenue multiple |
| FCF Yield | -0.9% | Warning | Lower cash yield |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 14.3% | Top 25% | 1.8x above |
| Free Cash Flow Margin | -2.6% | Bottom 10% | -0.5x below |
| Gross Margin | 24.6% | Bottom 50% | 0.7x below |
| Operating Margin | 7.5% | Bottom 50% | 0.9x below |
| Return on Equity (ROE) | 12.1% | Top 50% | 1.4x above |
| P/E Ratio | 47.2x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 14.3% (Good - Top 25% of sector (median: 8.0%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: -2.6% (Red flag)
Gross Margin
Revenue minus cost of goods sold as a percentage. Higher gross margins indicate pricing power and competitive advantage.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 50% | Strong pricing power and competitive moat |
| Good | 30% - 50% | Healthy margins, differentiated product |
| Adequate | 20% - 30% | Moderate margins, competitive industry |
| Warning | 10% - 20% | Thin margins, commodity-like business |
| Red flag | < 10% | Very thin margins, structural challenges |
Current: 24.6% (Adequate - Bottom 50% of sector (median: 33.4%))
Debt to Equity Ratio
Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 0.3x | Conservative leverage, strong balance sheet |
| Good | 0.3x - 0.7x | Moderate leverage, healthy financial position |
| Adequate | 0.7x - 1.5x | Elevated leverage, monitor closely |
| Warning | 1.5x - 3.0x | High leverage, increased financial risk |
| Red flag | > 3.0x | Excessive leverage, potential distress risk |
Current: 0.0% (Excellent)
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 47.2x (Adequate)
Free Cash Flow Yield
Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 8% | High cash return, potential value opportunity |
| Good | 5% - 8% | Solid cash yield |
| Adequate | 3% - 5% | Moderate cash return |
| Warning | 1% - 3% | Low cash yield, growth expectations |
| Red flag | < 1% | Minimal cash return to shareholders |
Current: -0.9% (Red flag)
Frequently Asked Questions
Q: What is GRAHAM CORP's Return on Invested Capital (ROIC)?
GRAHAM CORP (GHM) has a trailing twelve-month Return on Invested Capital (ROIC) of 14.3%. This compares above the sector median of 8.0%. An ROIC between 12-20% indicates solid capital allocation and sustainable competitive position.
Q: What is GRAHAM CORP's Free Cash Flow Margin?
GRAHAM CORP (GHM) has a free cash flow margin of -2.6%, generating $-6.1 million in free cash flow over the trailing twelve months. Negative free cash flow means the company is consuming cash, which may require financing.
Q: Is GRAHAM CORP stock overvalued or undervalued?
GRAHAM CORP (GHM) trades at a P/E ratio of 47.2x, which is above the sector median of N/A. The EV/Sales multiple is 2.1x.
Q: What is GRAHAM CORP's revenue and earnings growth?
GRAHAM CORP (GHM) grew revenue by 19.0% year-over-year. Earnings per share increased by 62.7% compared to the prior year. Solid growth above 10% suggests healthy business momentum.
Q: How does GRAHAM CORP compare to competitors in Industrials?
Compared to other companies in Industrials, GRAHAM CORP (GHM) shows: ROIC of 14.3% is above the sector median of 8.0% (Top 25%). FCF margin of -2.6% trails the sector median of 5.4%. Gross margin at 24.6% is 8.7 percentage points lower than sector peers. These rankings are based on MetricDuck's analysis of all Industrials companies with available SEC filings.
Q: What warning signs should I watch for with GRAHAM CORP?
Investors in GRAHAM CORP (GHM) should monitor these potential warning signs: 1) FCF margin is thin at -2.6%, leaving limited buffer for economic downturns. Regular monitoring of SEC filings and quarterly trends is recommended.
Data Source: Data sourced from 10-Q filed 2025-11-07. TTM metrics as of Q4 2025.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.