Analyzing Argan (NYSE:AGX) and Granite Construction (GVA)

Argan (NYSE: AGX) and Granite Construction (NYSE:GVA) are both construction companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, earnings, analyst recommendations, risk, dividends, institutional ownership and profitability.

Dividends

Argan pays an annual dividend of $0.70 per share and has a dividend yield of 1.2%. Granite Construction pays an annual dividend of $0.52 per share and has a dividend yield of 1.0%. Argan pays out 13.9% of its earnings in the form of a dividend. Granite Construction pays out 48.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Argan is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

Argan has a beta of 0.91, suggesting that its stock price is 9% less volatile than the S&P 500. Comparatively, Granite Construction has a beta of 1.2, suggesting that its stock price is 20% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and price targets for Argan and Granite Construction, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Argan 0 2 1 0 2.33
Granite Construction 0 2 6 0 2.75

Argan currently has a consensus price target of $71.00, suggesting a potential upside of 17.45%. Granite Construction has a consensus price target of $62.14, suggesting a potential upside of 18.68%. Given Granite Construction’s stronger consensus rating and higher probable upside, analysts plainly believe Granite Construction is more favorable than Argan.

Earnings and Valuation

This table compares Argan and Granite Construction’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Argan $775.19 million 1.21 $126.79 million $5.05 11.97
Granite Construction $2.70 billion 0.77 $126.96 million $1.07 48.94

Granite Construction has higher revenue and earnings than Argan. Argan is trading at a lower price-to-earnings ratio than Granite Construction, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

86.1% of Argan shares are held by institutional investors. Comparatively, 94.0% of Granite Construction shares are held by institutional investors. 9.5% of Argan shares are held by company insiders. Comparatively, 1.3% of Granite Construction shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Argan and Granite Construction’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Argan 10.15% 27.78% 13.15%
Granite Construction 1.61% 4.80% 2.49%

About Argan

Argan, Inc. is a holding company. The Company conducts operations through its subsidiaries, Gemma Power Systems, LLC and affiliates (GPS), Atlantic Projects Company Limited (APC), Southern Maryland Cable, Inc. (SMC) and The Roberts Company (Roberts). Through GPS and APC, the Company’s power industry services segment provides engineering, procurement, construction, commissioning, operations management, maintenance, development, technical and consulting services to the power generation and renewable energy markets. Through SMC, the telecommunications infrastructure services segment of the Company provides project management, construction, installation and maintenance services to commercial, local government and federal government customers. Through Roberts, the Company’s industrial fabrication and field services segment produces, delivers and installs fabricated steel components specializing in pressure vessels and heat exchangers for industrial plants.

About Granite Construction

Granite Construction Incorporated is a heavy civil contractor and construction materials producer in the United States. The Company operates through three segments: Construction, Large Project Construction and Construction Materials. The Company operates across the nation, serving both public and private sector clients. Within the public sector, it concentrates on heavy-civil infrastructure projects, including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, trenchless and underground utilities, power-related facilities, water and wastewater facilities, utilities, tunnels, dams and other infrastructure-related projects. Within the private sector, the Company offers site preparation and infrastructure services for residential development, energy development, commercial and industrial sites, and other facilities, as well as provides construction management professional services.

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