Argan, Inc. (AGX): A Bull Case Theory

We came across a bullish thesis on Argan, Inc. on Beating The Tide: Stock Picks That Outperform’s Substack by George Atuan, CFA. In this article, we will summarize the bulls’ thesis on AGX. Argan, Inc.'s share was trading at $203.84 as of July 17^th. AGX’s trailing P/E was 28.43 according to Yahoo Finance.

Argan Inc. (AGX), a specialized engineering, procurement, and construction (EPC) contractor, has delivered exceptional results amid accelerating power infrastructure investment, driven by rising electricity demand from data centers, manufacturing reshoring, and renewables integration. The company’s backlog has surged to a record $1.9 billion, providing multi-year revenue visibility, with large-scale projects like the 1.2 GW Sandow gas plant in Texas and a series of high-margin gas and battery storage contracts.

Argan’s unique positioning lies in its ability to handle multi-technology projects—gas-fired plants, battery storage, and renewables—allowing it to market itself as “energy transition ready.” Execution remains a key strength, with gross margins sustaining in the high teens and EBITDA margins trending above 15%, supported by a selective bidding approach and operational discipline. Its fortress balance sheet, with over $540 million in cash and no debt, underpins capital returns through buybacks and dividends while generating significant interest income, further boosting free cash flow.

A refreshed DCF model values AGX at $290 per share, up from $278, implying roughly 32% upside from current levels, with upside scenarios reaching $360 if backlog growth persists. However, the premium valuation (~33x forward P/E) leaves less room for error, as execution risks, project lumpiness, and competitive pressures remain key sensitivities.

Heavy insider selling over the past year signals tempered management sentiment but coincides with a period of record performance rather than operational weakness. Overall, AGX remains a high-quality play on the long-term rebuild of U.S. power infrastructure, offering resilient growth, strong cash generation, and an attractive risk/reward profile despite elevated expectations.

Previously, we covered a bullish thesis on EMCOR Group, Inc. (EME) by CompanyCharts in April 2025, which highlighted its U.S.-centric operations, fixed-price contracts, and strong earnings growth protecting margins amid trade volatility. The stock has appreciated about 46.2% since the thesis played out. It still stands, while George Atuan, CFA shares a similar view, emphasizing Argan, Inc.’s record backlog and energy transition focus.

Argan, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held AGX at the end of the first quarter which was 33 in the previous quarter. While we acknowledge the potential of AGX as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.