Granite Construction Inc (GVA, Financial) recently saw a daily gain of 14.98%, despite a 3-month loss of -4.39%. Its Earnings Per Share (EPS) stands at 0.98, raising questions about whether the stock is fairly valued. This article provides a detailed valuation analysis, offering insights into the intrinsic value of Granite Construction (GVA). Continue reading for a comprehensive understanding of the company's value.
Company Introduction
Granite Construction Inc is a leading infrastructure construction and development company in the United States. It specializes in heavy civil infrastructure projects, including roads, highways, transit facilities, airports, and bridges. The company also offers site preparation and infrastructure services for residential development, energy development, and other facilities. The majority of its revenue is derived from the construction segment, supplemented by its materials segment.
Understanding GF Value
The GF Value is a proprietary measure that represents the intrinsic value of a stock. It's calculated based on historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
Granite Construction's stock appears to be fairly valued according to the GF Value calculation. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it's crucial to carefully review a company's financial strength before deciding to buy its stock. Granite Construction has a cash-to-debt ratio of 0.83, better than 55.97% of companies in the Construction industry. Its overall financial strength is ranked 7 out of 10 by GuruFocus, indicating fair financial strength.
Profitability and Growth
Companies that have consistently been profitable over the long term offer less risk for investors. Granite Construction has been profitable 7 over the past 10 years. However, its operating margin of 1.38% ranks worse than 70.61% of companies in the Construction industry. Overall, Granite Construction's profitability is ranked 6 out of 10, indicating fair profitability.
Growth is a crucial factor in a company's valuation. Granite Construction's 3-year average annual revenue growth is 0.3%, ranking worse than 58.83% of companies in the Construction industry. However, its 3-year average EBITDA growth rate of 18.6% ranks better than 73.62% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. Over the past 12 months, Granite Construction's ROIC was 2.76, while its WACC came in at 10.86.
Conclusion
In conclusion, Granite Construction's stock appears to be fairly valued. The company has fair financial strength and profitability, with growth rates better than 73.62% of companies in the Construction industry. For more information about Granite Construction's stock, check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
