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1. Company Snapshot

1.a. Company Description

Graham Corporation, together with its subsidiaries, designs and manufactures fluid, power, heat transfer, and vacuum equipment for chemical and petrochemical processing, defense, space, petroleum refining, cryogenic, energy, and other industries.It offers power plant systems comprising ejectors and surface condensers; torpedo ejection and power systems, such as turbines, alternators, regulators, pumps, and blowers; and thermal management systems, including pumps, blowers, and electronics.The company also provides rocket propulsion systems, such as turbopumps and fuel pumps; cooling systems comprising pumps, compressors, fans, and blowers; and life support systems, including fans, pumps, and blowers.


In addition, it offers heat transfer and vacuum systems comprising ejectors, process condensers, surface condensers, liquid ring pumps, heat exchangers, and nozzles, as well as turbomachinery products; and power generation systems, including turbines, generators, compressors, and pumps.The company also services and sells spare parts for its equipment.It sells its products directly in the United States, the Middle East, Canada, Asia, South America, and internationally.


Graham Corporation was founded in 1936 and is headquartered in Batavia, New York.

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1.b. Last Insights on GHM

Graham Corporation's recent performance was driven by a series of positive developments. A strategic investment of $2.2 million from a customer to enhance production capabilities at its Batavia facility will boost efficiency and competitiveness. Additionally, the company has secured a $136.5 million follow-on contract to support the U.S. Navy's Virginia Class Submarine program, underscoring its expertise in mission-critical technologies. Graham's robust balance sheet, with no debt and $30M net cash, provides financial flexibility and security. The company's transformation from a cyclical petrochemical and energy business to a defense and space sector player has positioned it for long-term growth.

1.c. Company Highlights

2. Graham Corporation's Fiscal Q2 2026 Results: Strong Revenue Growth and Record Backlog

Graham Corporation reported a 23% increase in revenue to $66 million for its fiscal second quarter 2026, driven by a solid performance across all end markets. Adjusted EBITDA rose 12% to $6.3 million, resulting in an adjusted EBITDA margin expansion of 40 basis points to 10.8%. Earnings per share (EPS) came in at $0.31, slightly below estimates of $0.33. The company's financial performance was bolstered by strong bookings, leading to a book-to-bill ratio of 1.3x and a record backlog of $500.1 million, up 23% year-over-year. As CEO Matthew Malone noted, the growth in defense revenues was driven by the timing of project milestones, new programs, and growth in existing programs.

Publication Date: Nov -23

📋 Highlights
  • Revenue and EBITDA Growth: Fiscal Q2 revenue rose 23% to $66M; adjusted EBITDA increased 12% to $6.3M with a 10.8% margin (up 40 bps).
  • Strong Bookings and Backlog: Book-to-bill ratio of 1.3x drove record backlog of $500.1M, up 23% YoY.
  • Key Orders Secured: $25.5M MK48 Mod 7 Torpedo follow-on order and $22M in commercial space launch contracts.
  • Acquisition Impact: Xdot Bearing Technologies to be slightly accretive in FY26; enables SMR/defense tech integration.
  • Financial Position and Guidance: $20.6M cash, $44.7M revolver availability, and reaffirmed FY2027 targets of 8-10% organic revenue growth and low-to-mid teens EBITDA margins.

Order Bookings and Backlog

The company secured significant new orders, including a $25.5 million follow-on order for the MK48 Mod 7 Heavyweight Torpedo program and $22 million in new orders from commercial space launch customers. The diversified backlog and strong bookings position the company for future growth. Graham Corporation is targeting a 50-50 split between commercial and defense segments, enabling them to be competitive and bring commerciality to the defense market.

Small Modular Reactors (SMR) Business and Xdot Acquisition

Graham Corporation is optimistic about the SMR business, citing a bullish position in the nuclear market. The company is in the early phases of development on scaling programs and expects to see products go into the Idaho National Lab in the coming months. The recently acquired Xdot Bearing Technologies is expected to be slightly accretive to fiscal 2026 results, bringing analytical capabilities and foil-bearing technology that have applications across the company's main business lines.

Valuation and Outlook

With a P/E Ratio of 43.4 and an EV/EBITDA of 33.73, the market appears to be pricing in significant growth expectations. Analysts estimate revenue growth of 13.8% for the next year. The company's guidance for the full year remains reaffirmed, with confidence in achieving fiscal 2027 targets of 8-10% organic revenue growth and low to mid-teen adjusted EBITDA margin. The strong financial position, with $20.6 million in cash and no debt, supports the company's ability to invest in growth initiatives.

Investment Implications

The company's strong bookings, diversified backlog, and strategic acquisitions position it for long-term growth. The investment in the space market is expected to yield a return on investment (ROIC) of greater than 20%. With a proven success record on the MK48 Torpedo program and a strong pipeline of new orders, Graham Corporation is well-positioned to drive future growth and create value for shareholders.

3. NewsRoom

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Graham Corporation $GHM Shares Sold by Brandes Investment Partners LP

Dec -02

Source: defenseworld.net

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Graham Corporation (NYSE:GHM) Receives Average Rating of “Moderate Buy” from Brokerages

Nov -27

Source: defenseworld.net

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Graham Corporation: Double-Digit Growth, Higher Bar For H2

Nov -15

Source: seekingalpha.com

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Graham: Impressive, If Only Margins Join The Momentum As Well

Nov -12

Source: seekingalpha.com

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Graham Machinery: Not A Bad Time To Cash In After A Sturdy Run (Rating Downgrade)

Nov -11

Source: seekingalpha.com

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Graham Corporation (GHM) Q2 2026 Earnings Call Transcript

Nov -07

Source: seekingalpha.com

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Graham (GHM) Q2 Earnings Lag Estimates

Nov -07

Source: zacks.com

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Graham Corporation Appoints Mauro Gregorio to Board of Directors

Sep -03

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.89%)

6. Segments

Defense

Expected Growth: 4.5%

Growing demand for advanced military equipment, increasing defense spending, and Graham Corporation's expertise in custom-engineered systems drive growth in the defense segment.

Refining

Expected Growth: 4.5%

Growing demand for refined petroleum products, increasing adoption of proprietary technology, and rising investments in refining capacity expansion are expected to drive the refining segment's growth.

Chemical/Petrochemical

Expected Growth: 4.5%

Growing demand for custom-engineered equipment in the chemical and petrochemical industries, driven by increasing investments in process optimization and efficiency improvements, is expected to drive the segment's growth.

Other

Expected Growth: 4.5%

Growing demand for efficient processing and refining technologies in the chemical, petrochemical, and oil refining industries drives the 'Other' segment's growth, driven by increasing global energy demands and stringent environmental regulations.

Space

Expected Growth: 7.4%

Growing demand for satellite-based services, increasing government investments in space exploration, and advancements in space technology drive the growth of Graham Corporation's Space segment.

7. Detailed Products

Surface Condensers

Graham Corporation's surface condensers are designed to condense steam or other vapors in a wide range of industrial applications.

Heat Exchangers

Graham's heat exchangers are custom-designed to transfer heat between fluids in various industrial processes.

Ejectors

Graham's ejectors are used to create vacuum or compress gases in various industrial applications.

Oil Refinery Systems

Graham's oil refinery systems are designed to improve efficiency and reduce emissions in oil refining processes.

Chemical Process Systems

Graham's chemical process systems are custom-designed to meet the specific needs of chemical processing applications.

Power Generation Systems

Graham's power generation systems are designed to improve efficiency and reduce emissions in power generation applications.

8. Graham Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Graham Corporation's products are specialized and customized, making it difficult for substitutes to emerge. However, the company's reliance on a few large customers increases the threat of substitutes.

Bargaining Power Of Customers

Graham Corporation's customers are large and have significant bargaining power, which can lead to downward pressure on prices and margins.

Bargaining Power Of Suppliers

Graham Corporation has a diverse supplier base, which reduces the bargaining power of individual suppliers. The company's long-term relationships with suppliers also help to mitigate this risk.

Threat Of New Entrants

The capital-intensive nature of Graham Corporation's business, combined with the need for specialized expertise and equipment, creates a significant barrier to entry for new competitors.

Intensity Of Rivalry

The industry in which Graham Corporation operates is highly competitive, with several established players. However, the company's focus on niche markets and its strong relationships with customers help to mitigate the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 17.37%
Debt Cost 3.95%
Equity Weight 82.63%
Equity Cost 6.81%
WACC 6.31%
Leverage 21.02%

11. Quality Control: Graham Corporation passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Graham

A-Score: 5.1/10

Value: 3.3

Growth: 7.9

Quality: 5.9

Yield: 0.0

Momentum: 10.0

Volatility: 3.7

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A-Score: 5.1/10

Value: 4.5

Growth: 7.8

Quality: 6.5

Yield: 0.0

Momentum: 4.0

Volatility: 7.7

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Thermon

A-Score: 4.6/10

Value: 5.2

Growth: 5.8

Quality: 6.7

Yield: 0.0

Momentum: 4.0

Volatility: 6.0

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Tennant

A-Score: 4.6/10

Value: 4.3

Growth: 4.7

Quality: 5.6

Yield: 2.0

Momentum: 3.0

Volatility: 8.0

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Standex

A-Score: 4.2/10

Value: 1.5

Growth: 4.0

Quality: 5.4

Yield: 1.0

Momentum: 7.0

Volatility: 6.3

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Twin Disc

A-Score: 4.2/10

Value: 6.1

Growth: 4.8

Quality: 3.6

Yield: 1.0

Momentum: 7.0

Volatility: 2.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

57.91$

Current Price

57.91$

Potential

-0.00%

Expected Cash-Flows