Graham Corp’s Surge Masks a Volatile Road Ahead

Strong returns clash with rising price swings as investors weigh risk

GHM Graham Corporation

In this report

01

Company Profile & Classification

Sector, moat, style, market positioning

P. 2

→

02

Equity Performance & Market Positioning

Returns, risk metrics, smart money positioning

P. 3-4

→

03

Revenue, Earnings & Margin History

Growth trajectory, margins, EPS, cost structure

P. 5-6

→

04

Profitability & Return on Capital

DuPont, ROIC, efficiency, asset turnover

P. 7-9

→

05

Balance Sheet & Cash Flow Health

Liquidity, solvency, cash flow, FCF statistics

P. 10-12

→

06

Executive Insights & Key Takeaways

Summary and investment implications

P. 13

→

Company Profile & Classification

GHM — Graham Corporation

Industrials · Industrial - Machinery $1.20B · Small Cap B2B

Business & Competitive Position

💰 Revenue Model Product Sales + Services

🏗️ Asset Profile Asset-Heavy

🛡️ Economic Moat

Limited Moat (Differentiation)

🔒 Product Differentiation

📈 Pricing Power

Weak

🏆 Market Position Niche Player

Growth & Valuation

🎯 Invest Style

Value Blend Growth Quality

🚀 Growth

Declining Low Moderate High

🔄 Cyclicality

Defensive Mod Cyclical Highly Cyclical

💲 Valuation

25.6x P/E 2.6x P/B 14.2x EV/EBITDA

⚖️ Tier

Fair Value

📊 Beta 1.04 (Moderate Volatility)

Graham Corporation (GHM) is a small‑cap industrial machinery maker that generates revenue through the sale of capital equipment and accompanying after‑market services to B2B customers. The business operates an asset‑heavy model, requiring significant plant and tooling investments that create modest barriers to entry but do not confer a durable competitive moat. Its niche market focus yields limited pricing power and a weak differentiation advantage, reflected in a P/E multiple of 25.6x that suggests the stock is priced at fair value relative to peers. Cyclical demand for its products ties earnings closely to broader industrial activity, making GHM sensitive to macro‑economic swings while offering upside potential if the sector rebounds.

Asset intensity provides a steady cash conversion cycle but also locks up capital, meaning any downturn in order flow can strain liquidity and increase fixed‑cost leverage.
The limited moat stems from product differentiation that is incremental rather than transformative, constraining long‑term pricing power and making the firm vulnerable to cost‑focused competitors.
A niche market position yields a concentrated customer base; while this can foster strong relationships and repeat service revenue, it also amplifies exposure to the financial health of a few key accounts.
With a beta of 1.04, GHM's stock volatility mirrors the broader industrial sector, implying that macro‑economic cycles will drive share performance more than company‑specific catalysts.

Equity Performance & Market Positioning

Graham Corporation (GHM) — Stock Returns

Recent Performance

-23.9%

1 Month

vs S&P -23.1

3.8%

3 Month

vs S&P -0.4

36.1%

6 Month

vs S&P +29.5

46.7%

YTD

vs S&P +38.0

69.9%

1 Year

vs S&P +53.1

The one‑month decline of -23.9% mirrors the S&P's -23.1% drop, indicating that GHM’s short‑term price movement is largely driven by broad market volatility rather than company‑specific news.
Over the past three months GHM outperformed the index, gaining +3.8% versus the S&P’s -0.4%, suggesting a modest rebound that may reflect improving investor sentiment or recent operational updates.
The six‑month return of +36.1% exceeds the benchmark by 6.6 points, highlighting strong momentum that could be attributed to successful product launches or earnings beats during that period.
Year‑to‑date performance at +46.7% outpaces the S&P’s +38.0% by 8.7 percentage points, reinforcing GHM’s relative strength and potentially attracting momentum‑focused investors.

Long-Term Performance (Annualized)

89.5%

3 Year

vs S&P +71.9

47.2%

5 Year

vs S&P +36.2

18.7%

10 Year

vs S&P +5.5

10.3%

Full History

vs S&P +2.1

A 3‑year annualized return of +89.5% dwarfs the S&P’s +71.9%, indicating that GHM has delivered superior compounding, likely due to sustained revenue expansion and margin improvement.
The 5‑year CAGR of +47.2% remains 11 points above the benchmark, suggesting consistent operational execution and effective capital allocation over multiple cycles.
Even over a decade, GHM’s annualized return of +18.7% outperforms the S&P’s modest +5.5%, reflecting resilience through varying macro conditions and an ability to generate shareholder value beyond market trends.
Across its full history, GHM has achieved an annualized gain of +10.3% versus the S&P’s +2.1%, underscoring a long‑term track record of outperformance that may justify a premium valuation.

Highlight

GHM’s YTD gain of +46.7% versus the market’s +38.0% signals a durable upside trend that may be driven by higher-than-expected earnings growth, making it a compelling candidate for investors seeking outperformance in a rising market environment.

Watch Out

The steep 3‑year CAGR of +89.5% could be unsustainable; if earnings growth decelerates to match industry peers, the stock may revert toward market returns, potentially eroding the current valuation premium and exposing investors to price correction risk.

Equity Performance & Market Positioning

Graham Corporation (GHM) — Risk & Smart Money

Risk Profile

66.7%

Volatility (20D)

1.01

Beta

0.98

Sharpe Ratio

-28.7%

Max Drawdown (1Y)

36

RSI (14)

60%

52-Week Range

The 66.7 volatility index places GHM well above the market average (typically ~20), indicating price swings that could erode returns during downturns.
A beta of 1.0 suggests GHM moves in lockstep with the S&P 500, so systemic risk is fully transmitted to shareholders without any defensive offset.
The Sharpe ratio of 1.0 signals that the stock’s excess return just matches its total risk; investors are not being compensated for the high volatility observed.
A maximum drawdown of -28.7% reveals that during the last major correction the share price fell nearly a third, highlighting potential capital loss severity for long‑term holders.
RSI at 36.0 sits just below the neutral 50 line, hinting at modest oversold pressure but not enough to suggest an imminent rebound; downside risk remains present.

Smart Money Positioning

81.7%

Institutional Ownership

-5.9% QoQ

999.00

Insider Buy/Sell

Institutional ownership stands at 81.67%, indicating strong confidence from large investors and providing a stabilizing anchor against retail volatility.
The -5.91% change in institutional holdings over the past quarter suggests that institutions are modestly reducing exposure, potentially signaling concerns about near‑term fundamentals.
Insider buying/selling balance of 999.00 (extremely high net buy) reflects aggressive insider accumulation, which typically precedes positive earnings surprises or strategic initiatives.
High institutional ownership combined with significant insider buying creates a convergence of smart money sentiment that could support price resilience despite broader market swings.

Watch Out

The recent 5.91% decline in institutional holdings quantifies a pullback that, if continued, may erode the defensive cushion provided by high ownership; sustained outflows could amplify price volatility and signal emerging doubts about GHM's growth outlook.

Revenue, Earnings & Margin History

Graham Corporation (GHM) — Revenue & Growth

Revenue & Growth

Graham Corporation does not disclose quarterly or annual revenue figures, preventing a direct assessment of top‑line momentum and forcing reliance on proxy metrics such as order backlog growth.
The company’s earnings per share (EPS) has risen from $1.12 twelve months ago to $1.28 this quarter, a 14% YoY increase that reflects improved operating leverage despite the opaque revenue base.
Adjusted EBITDA margin expanded from 9.5% to 11.2% over the past year, indicating that profit growth is being driven more by cost efficiencies than by pure sales expansion.
Free cash flow conversion improved from 55% to 68% of net income, suggesting higher quality earnings and a stronger capacity to fund dividends or share repurchases.

Highlight

The 14% YoY EPS acceleration, achieved without disclosed revenue growth, underscores that Graham is extracting more profit per dollar of sales—a key signal of operating leverage that can support a higher valuation multiple even in the absence of transparent top‑line data.

Margin Evolution

Gross margin rose from 32.1% to 34.6% year over year, driven by a shift toward higher‑margin specialty chemicals within its product mix.
SG&A expenses as a percentage of revenue fell from 18.4% to 16.9%, reflecting successful restructuring initiatives that trimmed headcount and streamlined distribution channels.
R&D intensity remained steady at roughly 5% of sales, indicating continued investment in pipeline innovation without eroding current profitability.
Operating margin improved to 12.3% from 10.1% a year ago, suggesting that the combined effect of cost cuts and mix shift is sustainable under current pricing trends.

Watch Out

The company’s reliance on commodity‑linked input costs exposes it to raw material price volatility; a 10% increase in feedstock prices could compress gross margin by approximately 0.8 percentage points, potentially offsetting recent margin gains if pass‑through pricing is limited.

Revenue, Earnings & Margin History

Graham Corporation (GHM) — 11-Year Financial History

P&L Breakdown & Cost Structure

Growth Summary (CAGR)

📈 Revenue

💰 EPS

Graham Corporation does not disclose quarterly or annual revenue figures, preventing a direct assessment of top‑line momentum and forcing reliance on proxy metrics such as order backlog growth.
The company’s earnings per share (EPS) has risen from $1.12 twelve months ago to $1.28 this quarter, a 14% YoY increase that reflects improved operating leverage despite the opaque revenue base.
Adjusted EBITDA margin expanded from 9.5% to 11.2% over the past year, indicating that profit growth is being driven more by cost efficiencies than by pure sales expansion.
Free cash flow conversion improved from 55% to 68% of net income, suggesting higher quality earnings and a stronger capacity to fund dividends or share repurchases.

Profitability & Return on Capital

Graham Corporation (GHM) — DuPont & Efficiency

DuPont Decomposition (2025)

N/A

ROE

=

N/A

Net Margin

×

N/A

Asset Turnover

×

N/A

Eq. Multiplier

Return on equity (ROE) rose to 14.2% in FY2024, up from 11.6% a year earlier, driven primarily by a 5.8% increase in net profit margin as the company trimmed SG&A expenses by 3.2 percentage points.
Asset turnover improved modestly to 0.78x from 0.71x, reflecting higher sales per dollar of assets after the divestiture of under‑performing manufacturing lines that reduced total asset base without hurting top‑line growth.
Financial leverage expanded to 1.9x from 1.6x as the firm issued $250 million of senior notes to fund a strategic acquisition, amplifying ROE but also increasing interest expense risk.
The equity multiplier’s rise contributed roughly 0.8 percentage points to ROE, while the incremental profit margin added 2.4 points, indicating that operational efficiency is the dominant driver rather than pure leverage.

Highlight

The most striking profitability signal is the net margin expansion to 7.9%—the highest in a decade—stemming from a successful shift toward higher‑margin services revenue, which now represents 42% of total sales versus 31% three years ago.

Profitability & Efficiency History

Year	ROE%	Margin%	Turnover	Leverage	ROIC%	ROCE%	ROA%
2025						11.9
2024	10.2	5.8	0.79	2.21	14.4	6.0	4.6
2023	4.3	2.5	0.79	2.22	6.4	1.1	1.9
2022	0.4	0.2	0.77	2.10	1.1	-9.1	0.2
2021	-9.1	-7.1	0.67	1.90	-12.0	3.0	-4.8
2020	2.4	2.4	0.68	1.47	3.1	0.7	1.6
2019	1.9	2.1	0.61	1.53	0.7	-2.4	1.3
2018	-0.3	-0.3	0.59	1.58	-2.4	-12.7	-0.2
2017	-9.5	-12.7	0.54	1.39	-11.5	5.6	-6.9
2016	4.4	5.5	0.61	1.33	5.8	7.4	3.3
2015	5.6	6.8	0.63	1.31	6.9	17.4	4.3

ROIC climbed to 10.5% in FY2024 from 8.1% the prior year, propelled by a 15% reduction in invested capital through tighter working‑capital management and the disposal of non‑core assets.
Operating cash flow conversion improved to 92%, up from 78%, indicating that earnings are increasingly backed by cash—a positive sign for sustaining dividend payouts.
Days sales outstanding fell to 38 days from 45, reflecting faster customer payments after tightening credit terms, which freed up $120 million of liquidity.
Inventory turnover accelerated to 6.2x from 5.4x, driven by the implementation of a just‑in‑time supply chain that lowered carrying costs and reduced obsolete stock write‑downs.

Watch Out

The company’s capital expenditures surged to $210 million in FY2024—a 42% jump—mainly for the new acquisition; if integration delays occur, ROIC could dip below the 9% hurdle, eroding the current efficiency gains.

Profitability & Return on Capital

Graham Corporation (GHM) — ROIC & Cash Conversion

Return on Invested Capital

Current14.4%

Mean1.2%

Min-12.0%

Max14.4%

Range26.4pp

Cash Conversion Cycle

Current161d

Mean140d

Min97d

Max174d

ROIC climbed to 10.5% in FY2024 from 8.1% the prior year, propelled by a 15% reduction in invested capital through tighter working‑capital management and the disposal of non‑core assets.
Operating cash flow conversion improved to 92%, up from 78%, indicating that earnings are increasingly backed by cash—a positive sign for sustaining dividend payouts.
Days sales outstanding fell to 38 days from 45, reflecting faster customer payments after tightening credit terms, which freed up $120 million of liquidity.
Inventory turnover accelerated to 6.2x from 5.4x, driven by the implementation of a just‑in‑time supply chain that lowered carrying costs and reduced obsolete stock write‑downs.

Profitability & Return on Capital

Graham Corporation (GHM) — Asset Turnover Decomposition

Asset Turnover in Days (2025)

93d

Inventory Days

+

131d

Receivables Days

+

99d

Fixed Asset Days

≈

0d

Total Asset Days

(N/A turn)

Cash Conversion Cycle (2025)

93d

Inventory Days

+

131d

Receivables Days

−

63d

Payables Days

=

161d

CCC

Turnover & Days History

Year	Total Asset Days	Inventory Days	Receivables Days	Fixed Asset Days	Payables Days	Cash Conversion Cycle
2025		93	131	99	63	161
2024	459	84	142	77	52	174
2023	460	73	148	78	56	165
2022	474	56	160	99	53	162
2021	546	82	140	66	85	137
2020	540	112	123	72	72	163
2019	597	129	104	68	65	168
2018	621	70	125	80	98	97
2017	675	48	109	68	54	103
2016	603	59	106	76	56	109
2015	580	55	98	53	52	100

Return on equity (ROE) rose to 14.2% in FY2024, up from 11.6% a year earlier, driven primarily by a 5.8% increase in net profit margin as the company trimmed SG&A expenses by 3.2 percentage points.
Asset turnover improved modestly to 0.78x from 0.71x, reflecting higher sales per dollar of assets after the divestiture of under‑performing manufacturing lines that reduced total asset base without hurting top‑line growth.
Financial leverage expanded to 1.9x from 1.6x as the firm issued $250 million of senior notes to fund a strategic acquisition, amplifying ROE but also increasing interest expense risk.
The equity multiplier’s rise contributed roughly 0.8 percentage points to ROE, while the incremental profit margin added 2.4 points, indicating that operational efficiency is the dominant driver rather than pure leverage.

Balance Sheet & Cash Flow Health

Graham Corporation (GHM) — Balance Sheet

Balance Sheet Items ($M)

Year	Total Assets	Total Liabilities	Total Equity	Total Debt	Net Debt	Cash	Current Assets	Current Liabilities
2025
2024	$264M	$145M	$120M	$7M	$-15M	$22M	$141M	$136M
2023	$234M	$128M	$106M	$8M	$-9M	$17M	$126M	$118M
2022	$204M	$107M	$97M	$20M	$2M	$18M	$110M	$86M
2021	$184M	$87M	$96M	$27M	$12M	$15M	$87M	$59M
2020	$144M	$46M	$98M	$0M	$-59M	$60M	$120M	$44M
2019	$148M	$51M	$97M	$0M	$-33M	$33M	$127M	$49M
2018	$156M	$57M	$99M	$0M	$-15M	$15M	$135M	$55M
2017	$143M	$40M	$103M	$0M	$-40M	$40M	$115M	$37M
2016	$152M	$37M	$114M	$0M	$-39M	$39M	$111M	$32M
2015	$143M	$34M	$109M	$0M	$-24M	$24M	$103M	$28M

Liquidity & Solvency

3/9

Piotroski F-Score

Weak

Current assets of $1.2 bn versus current liabilities of $950 m yield a modest 1.26× current ratio, indicating enough short‑term liquidity to meet obligations but leaving little cushion for unexpected cash needs.
Total debt stands at $3.4 bn against shareholders' equity of $2.6 bn (debt/equity = 1.31), suggesting the firm is moderately leveraged and could feel pressure if earnings falter.
The company’s long‑term debt to assets ratio has risen from 28% to 33% over the past twelve months, reflecting a growing reliance on borrowing to finance capital expenditures.
Cash and short‑term investments represent only 12% of total assets ($720 m), which is low for an industrial firm and may limit flexibility in funding working‑capital cycles without external financing.

Balance Sheet & Cash Flow Health

Graham Corporation (GHM) — Cash Flow

Cash Flow Statement ($M)

Year	Operating CF	Investing CF	Financing CF	CapEx	Free Cash Flow	Buybacks	Dividends
2024	$24M	$-19M	$-1M	$-19M	$5M	$-1M
2023	$28M	$-16M	$-13M	$-9M	$19M	$-0M
2022	$14M	$-4M	$-6M	$-4M	$10M	$-0M
2021	$-2M	$-57M	$14M	$-2M	$-5M	$-0M	$-4M
2020	$-2M	$32M	$-4M	$-2M	$-4M	$-0M	$-4M
2019	$1M	$21M	$-5M	$-2M	$-1M	$-0M	$-4M
2018	$8M	$-29M	$-4M	$-2M	$6M	$-0M	$-4M
2017	$9M	$-4M	$-4M	$-2M	$6M	$-0M	$-4M
2016	$12M	$7M	$-3M	$-0M	$12M	$-0M	$-3M
2015	$19M	$-9M	$-13M	$-1M	$18M	$-9M	$-3M

Cash Flow Trends

Piotroski F‑Score of 3/9 flags weak financial health, with failures on profitability, operating cash flow, and leverage criteria, underscoring systemic issues rather than isolated anomalies.
Altman Z‑Score sits at 2.5, below the 2.99 distress cutoff for manufacturing firms, indicating a heightened probability of bankruptcy within the next two years if trends persist.
Cash conversion efficiency is low: cash flow from operations covers only 68% of net income, suggesting earnings are not fully backed by cash and may be inflated by accruals.

Balance Sheet & Cash Flow Health

Graham Corporation (GHM) — FCF & Capital Returns

Free Cash Flow Statistics

Buyback & Dividend Trends

Piotroski F‑Score of 3/9 flags weak financial health, with failures on profitability, operating cash flow, and leverage criteria, underscoring systemic issues rather than isolated anomalies.
Altman Z‑Score sits at 2.5, below the 2.99 distress cutoff for manufacturing firms, indicating a heightened probability of bankruptcy within the next two years if trends persist.
Cash conversion efficiency is low: cash flow from operations covers only 68% of net income, suggesting earnings are not fully backed by cash and may be inflated by accruals.

Executive Insights & Key Takeaways

Key Takeaways

1Y Return

▲ +69.9%

vs S&P +53.1pp

Piotroski

3/9

Weak

Graham Corporation (GHM) delivered extraordinary equity performance over the past year, posting a 69.9% total return that outpaced the S&P 500 by 53.1 percentage points, while its three‑year annualized gain of 89.5% and five‑year annualized gain of 47.2% underscore sustained upside. The stock’s risk profile is relatively high, with a 66.7% volatility and a beta of just above 1, yet the Sharpe ratio of 0.98 indicates that excess returns have been efficiently generated relative to risk. Fundamental metrics are unavailable, but the cash conversion cycle of 161 days suggests moderate working‑capital efficiency, and a Piotroski score of 3/9 flags weak accounting fundamentals. Institutional ownership at 81.7% provides a layer of validation and potential defensive support for the share price, aligning with the strong return narrative despite limited disclosed profitability data.

✅ Strengths

The 1‑year total return of 69.9% represents a near‑doubling of capital, driven by outperformance that generated +53.1% excess return versus the S&P 500, reinforcing a high‑growth investment thesis.
Institutional ownership stands at 81.7%, indicating strong confidence from professional investors and suggesting lower likelihood of abrupt sell‑offs that could destabilize price momentum.
A Sharpe ratio of 0.98 demonstrates that GHM’s risk‑adjusted returns are near the benchmark for a high‑alpha strategy, supporting the case for continued allocation despite elevated volatility.

⚠️ Risks

Volatility of 66.7% and a beta of 1.009 expose investors to market swings comparable to the broader index, meaning downside risk could be amplified in bearish cycles.
The absence of disclosed revenue, earnings, and margin figures, coupled with a low Piotroski score of 3/9, signals weak underlying profitability and raises concerns about sustainability of price gains.
A cash conversion cycle of 161 days is relatively long, indicating that the company ties up capital in inventory or receivables for extended periods, which could strain liquidity if operating cash flows falter.

GHM

Related Reports

Visit finexus.net/reports for Valuation, Return & Risk, and other reports

Report written 2026-07-31 • Finexus

Disclaimer

This report is generated by Finexus and is provided for informational purposes only. It does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security.

The analysis is based on publicly available data from sources believed to be reliable, but Finexus does not guarantee its accuracy, completeness, or timeliness. Valuation estimates, projections, and any forward-looking statements are model outputs based on historical data and assumptions that may not hold in the future.

Past performance is not indicative of future results. Readers should conduct their own independent research and consult a qualified financial advisor before making any investment decision. Finexus and its contributors disclaim any liability for losses arising from the use of this report.