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

We came across a bullish thesis on Argan, Inc. on Kroker Equity Research’s Substack. In this article, we will summarize the bulls’ thesis on AGX. Argan, Inc.'s share was trading at $355.51 as of January 29th. AGX’s trailing P/E was 42.17 according to Yahoo Finance.

Argan, Inc., through its subsidiaries, provides engineering, procurement, construction, commissioning, maintenance, project development, and technical consulting services to the power generation market in the United States, Republic of Ireland, and the United Kingdom. AGX may appear modest on the surface as a construction holding company focused on energy infrastructure, but it is a high-quality compounder with a disciplined approach, strong balance sheet, and powerful cash-generation engine.

The company operates through four subsidiaries—Gemma Power Systems (GPS), Atlantic Projects Company (APC), The Roberts Company (TRC), and SMC Infrastructure Solutions (SMC)—each targeting distinct industrial niches, from large-scale power plants to industrial fabrication and telecom infrastructure. GPS drives roughly 79% of revenue, building turnkey natural-gas and renewable projects, while TRC, APC, and SMC provide complementary diversification, smoothing revenue volatility. Argan’s decentralized model allows subsidiaries operational autonomy, while the parent focuses on strategy, capital allocation, and selective acquisitions.

Financially, Argan has demonstrated exceptional performance. Fiscal 2025 revenue surged to $874 million, up 52% year-over-year, translating into $85.5 million in net income, nearly tripling the prior year. Gross margins expanded to 16.1%, and backlog grew to $1.3 billion, providing multi-year visibility. Q2 FY2026 showed continued momentum, with revenue of $237.7 million, gross margins of 18.6%, and net income doubling to $35.3 million. Strong cash and investments, combined with zero debt, give Argan rare financial flexibility, allowing shareholder-friendly actions like dividends and buybacks.

Argan’s competitive advantages include a proven track record in executing complex fixed-price EPC projects, a loyal client base, fortress balance sheet, niche diversification, and positioning for the energy transition. Risks include project concentration, fixed-price exposure, cyclical demand, policy shifts toward zero-carbon energy, labor constraints, and potential competition. Despite these, Argan’s disciplined project selection, execution excellence, and cash conversion power create a unique opportunity. The combination of record backlog, expanding margins, and strategic optionality positions AGX as a compelling long-term investment, blending the upside of a growth compounder with the resilience of a conservative, cash-rich contractor.

Previously we covered a bullish thesis on EMCOR Group, Inc. (EME) by CompanyCharts in April 2025, which highlighted the company’s U.S.-focused operations, fixed-price contracts, strong prefabrication capabilities, and robust earnings growth. The company's stock price has appreciated approximately by 91.00% since our coverage. The thesis still stands as Kroker Equity Research shares a similar perspective but emphasizes Argan, Inc.’s execution excellence, multi-subsidiary diversification, and strong cash-generation.

Argan, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held AGX at the end of the second quarter which was 31 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.