Friday - Lake Street Capital Markets has raised the price target for Argan (NYSE: NYSE:AGX) shares to $85.00 from the previous $70.00, while maintaining a Buy rating on the stock.
The increase follows Argan's first-quarter results, which exceeded expectations despite a $2.6 million impact from the Killroot project. The company's successful handling of the Trumbull project and improvements in its industrial segment were key contributors to the positive performance.
The analyst noted Argan's growing project pipeline, highlighting the acceleration with several new large natural gas power plants and renewable projects expected to be awarded in the next three to nine months.
A Letter of Intent (LOI) has been received from an LNG project for the installation of five 90 MW gas turbines, and the firm anticipates this project to be officially awarded shortly. The estimate for the potential revenue from this project ranges between $50 million and $75 million.
Additionally, Argan has received a limited notice to proceed on a significant solar project in Illinois, which includes a 405 MW solar farm paired with 22 MW of battery storage.
The rising electricity demand, spurred by new power needs from data centers and electric vehicles (EVs), is catalyzing progress on power infrastructure projects.
Lake Street Capital Markets expects Argan to experience a rise in activity over the next 12 to 24 months, with a steady flow of new project awards anticipated.
The firm has adjusted its estimates to reflect the strengthening market environment. The new price target of $85 is based on a 9.5 times EV/EBITDA multiple on the firm's FY27 projections.
In other recent news, Argan, Inc. experienced a robust start to fiscal year 2025, marked by a substantial 52% increase in consolidated revenues to $157.7 million, and an EBITDA of $11.9 million.
This positive financial performance was primarily driven by strong results from Gemma Power Systems and The Roberts Company. The company's first-quarter project backlog reached an impressive $824 million, including a significant $300 million in renewable energy projects.
Argan, Inc. reported a solid balance sheet with $416 million in cash and no debt, positioning it favorably to leverage the growing demand for energy infrastructure, particularly in the renewable sector.
Gross profit for the quarter was $17.9 million, reflecting a gross profit percentage of 11.4%. The company also saw a substantial increase in net income to $7.9 million, up from the previous year's $2.1 million.
These are recent developments that underline Argan, Inc.'s strong financial health and strategic positioning in the energy infrastructure market.
The company's plans to add more large-scale projects throughout the year, including a mix of renewable and gas projects, indicate potential for sustained growth.
However, it's worth noting that the gross profit percentage declined from the previous year's 13.7% to 11.4%, due to an unfavorable gross profit adjustment and changes in project mix.
InvestingPro Insights
Argan's robust performance and promising outlook are reflected in key financial metrics and market sentiment. With a market capitalization of approximately $923.07 million and a strong revenue growth of 26.0% over the last twelve months as of Q4 2024, the company's financial health appears solid. Analysts remain optimistic, as evidenced by a significant revenue growth of 38.54% in Q4 2024. Moreover, investors have seen substantial returns, with a price total return of 59.43% over the past year, highlighting the stock's positive trajectory.
InvestingPro Tips underscore the company's financial prudence, as Argan holds more cash than debt on its balance sheet, and analysts expect the company to be profitable this year. Additionally, the company has maintained dividend payments for 14 consecutive years, with a notable dividend growth of 20.0% in the last twelve months as of Q4 2024, showcasing its commitment to shareholder returns. For investors looking for more in-depth analysis and additional tips, there are 10 more InvestingPro Tips available, which can be accessed with an exclusive offer using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Argan's forward momentum is also reflected in its share price, currently trading at 96.7% of its 52-week high, and a strong return over the last three months of 42.67%. With the next earnings date set for September 4, 2024, investors may be keen to see if the company's upward trend continues. The InvestingPro Fair Value estimate of $78.29 suggests a potential upside, considering the stock's previous close at $69.14.
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