Is Graham Corporation stock a buy right now?

Beacon Securities’ Russell Stanley reiterated a “Buy” rating and $62.00 target on Graham Corporation (Graham Corporation Stock Quote, Chart, News, Analysts, Financials NYSE:GHM) ahead of Q1 results due August 5. “GHM has beaten our forecasts in each of the three quarters reported since we launched coverage,” Stanley noted on July 23, though his Q1 estimates are slightly below consensus.

New York-based Graham designs and manufactures custom-engineered fluid, power, heat transfer, and vacuum technologies for the defence, energy, process, and space industries. It employs about 636 people across U.S. facilities and international support offices in China and India.

“With its Q4 results in June, management introduced F2026 guidance for revenue of $225-$235M and adj EBITDA of $22-$28M, and given that guidance is still fresh, we would be surprised by any revisions at this point,” Stanley said. “We will also be interested in any comments regarding its mid-term targets for organic revenue growth of 8-10%/year, with adj EBITDA margins reaching 13-15% by F2027. Management has consistently reiterated these targets, though outperformance on organic revenue growth has forced the implied targets higher in dollar terms.”

Stanley said new orders, book-to-bill, and backlog figures should appear strong in Q1, helped by the previously announced $137-million follow-on order for the Virginia Class submarine program. Of that, $50-million was included in Q4, with the remaining $87-million expected to be reflected in Q1.

“Given quarterly new orders have averaged $62M over the last eight quarters, GHM is set to report a relatively high new order total solely on the back of that May contract, before including any other bookings,” he said. “Based on our Q1 top line forecast, that would also produce a book-to-bill ratio for the quarter of 1.6x, or 1.2x on an LTM basis. As of last quarter, GHM’s backlog totalled $412M, of which 83% related to its Defence business, the vast majority of which relates to US Navy programs.”

Stanley said that Graham’s major customer, General Dynamics, delivered a strong Q2, beating Street-high estimates with $13-billion in revenue and $3.74 in EPS, compared to consensus forecasts of $12.4-billion and $3.55, respectively. The Marine Systems division, which includes submarine programs where Graham is a supplier, generated $4.2-billion in revenue, up 22% year-over-year and 18% quarter-over-quarter, driven by strength in both the Virginia and Columbia Class programs. Operating margins were just under 7%, with management acknowledging room for improvement. The division’s backlog hit a record $53-billion, including $18-billion in Block V orders for Virginia Class submarines.

During General Dynamics’ conference call, management emphasized funding aimed at improving productivity, wages, and training, supporting the broader submarine supply chain. Stanley noted, “Over 75% of GHM’s new $17.6M facility in upstate New York was funded by a customer.” He added that GD guided to $15.6-billion in Marine Systems revenue and 7% operating margins in fiscal 2025, up from prior guidance. While GD recently received a $1.9-billion modification order on the Virginia Class program, it remains unclear how much of that was booked in Q2.

Stanley expects Graham to post $24-million in Adjusted EBITDA on $230-million in revenue in 2026, rising to $38-million on $253-million in 2027.

Stanley noted that while Graham’s stock is hitting new 52-week highs, it still trades at a 36% discount to its closest peer, Leonardo DRS. Graham is valued at 15.5x his F2027 Adjusted EBITDA forecast, compared to 24.2x for DRS, despite expected EBITDA growth more than twice as fast—a 30% two-year CAGR versus 14% for DRS. He cited Q1 results, contract wins, and M&A as potential catalysts.

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