NYSE:GHM
GRAHAM CORP
A financially resilient industrial manufacturer demonstrating accelerating revenue growth and expanding net margins over the last five years.
Key Metrics
Investment Thesis
Bull Case
The stock is attractive due to a clear growth trajectory with revenue increasing 34% over three years while net income grew more than 3,000%. The company generates robust operating cash flow of $24.3M which supports its ability to fund the $19.0M in annual capital expenditures and return value to shareholders through share repurchases. A low debt issuance history combined with a strong cash position suggests a resilient business model capable of weathering economic downturns.
Bear Case
Investors should be cautious regarding the substantial retained earnings deficit of $94.2M, which indicates historical losses that have accumulated despite recent profits. The company's current liabilities of $136.2M are nearly equal to total current assets, creating potential short-term liquidity pressure if receivables collection slows. Additionally, the significant non-cash adjustments and other cash flow outflows suggest complex underlying operational dynamics that may not fully translate into sustainable future earnings.
About GRAHAM CORP
Graham Corp (GHM) specializes in industrial manufacturing and distribution of high-performance components, serving sectors such as aerospace, defense, and energy. The company leverages a robust balance sheet with $21.6M in cash to fund operations and strategic growth while maintaining strong liquidity ratios.
Analysis
Management Discussion
Graham Corp has executed a strong turnaround, with revenue climbing from $157.1M in 2023 to $209.9M in 2025 and net income surging from $0.4M to $12.2M. This profitability expansion was driven by improved gross margins on $209.9M of revenue, offsetting increased operating expenses of $37.7M. Cash flow from operations ($24.3M) comfortably covers capital expenditures ($19.0M), allowing the firm to grow without relying on external financing.
Industry Overview
The industrial manufacturing sector is characterized by cyclical demand driven by infrastructure spending, energy needs, and defense requirements. Companies in this space face pressure to optimize supply chains and control raw material costs while investing heavily in technology and automation. Market leaders often benefit from high barriers to entry related to specialized engineering capabilities and long-term contracts with major end-users.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Revenue | $157.1M | $185.5M | $209.9M |
| Cost of Revenue | $131.7M | $144.9M | $157.0M |
| Gross Profit | $25.4M | $40.6M | $52.9M |
| Operating Expenses | $24.2M | $33.7M | $37.7M |
| Operating Income | $1.2M | $6.9M | $15.2M |
| R&D | $4.1M | $3.9M | $4.0M |
| G&A | $23.1M | $32.2M | $37.1M |
| Stock-Based Comp | $806.0K | $1.3M | $2.0M |
| D&A | — | — | $5.9M |
| Depreciation | $3.5M | $3.3M | $3.7M |
| Amortization | $2.5M | $2.2M | $2.2M |
| Other OpEx | $-3.0M | $-2.5M | $-3.5M |
| Non-Operating Income | $-689.0K | $-1.3M | $219.0K |
| Interest Expense | $1.1M | $248.0K | $-583.0K |
| Interest Income | $129.0K | — | — |
| Pre-Tax Income | $561.0K | $5.6M | $15.4M |
| Income Tax | $194.0K | $1.0M | $3.2M |
| Continuing Ops | $367.0K | $4.6M | $12.2M |
| Discontinued Ops | $0 | $0 | $0 |
| Net Income | $367.0K | $4.6M | $12.2M |
| Minority Interest | $0 | $0 | $0 |
| Net to Common | $367.0K | $4.6M | $12.2M |
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Current Assets | $110.1M | $126.3M | $141.4M |
| Cash & Equivalents | $18.3M | $16.9M | $21.6M |
| Accounts Receivable | $24.0M | $44.4M | $35.5M |
| Inventory | $26.3M | $33.4M | $40.0M |
| Prepaid Expenses | $1.5M | $3.6M | $4.2M |
| Other Current Assets | $40.0M | $28.0M | $40.0M |
| Long-Term Assets | $93.8M | $107.6M | $122.7M |
| PP&E (Net) | $25.5M | $32.1M | $50.6M |
| Goodwill | $23.5M | $25.5M | $25.5M |
| Operating Leases | $8.2M | $7.3M | $6.4M |
| Other LT Assets | $36.6M | $42.6M | $40.2M |
| Total Assets | $203.9M | $233.9M | $264.1M |
| Current Liabilities | $86.2M | $118.2M | $136.2M |
| Accounts Payable | $20.2M | $20.8M | $27.3M |
| Current Debt | $2.0M | $0 | — |
| Current Leases | $1.0M | $1.2M | $1.3M |
| Deferred Revenue | $46.0M | $72.0M | $84.1M |
| Taxes Payable | $16.0K | $715.0K | $0 |
| Other Current Liab | $10.4M | $16.8M | $19.2M |
| Long-Term Liabilities | $20.8M | $10.1M | $8.4M |
| Long-Term Debt | — | $0 | — |
| LT Operating Leases | $7.5M | $6.4M | $5.5M |
| Other LT Liab | $13.3M | $3.7M | $2.9M |
| Total Liabilities | $107.0M | $128.3M | $144.5M |
| Shareholders' Equity | $96.9M | $105.6M | $119.6M |
| Retained Earnings | $77.4M | $82.0M | $94.2M |
| AOCI | $-7.5M | $-7.0M | $-7.0M |
| Treasury Stock | $2.2M | $2.5M | $3.4M |
| Total L&E | $203.9M | $233.9M | $264.1M |
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Net Income (CFO) | $367.0K | $4.6M | $12.2M |
| Non-Cash Adjustments | $-33.0M | $-18.7M | $-17.1M |
| Working Capital Changes | $46.6M | $42.3M | $29.2M |
| Cash from Operations | $13.9M | $28.1M | $24.3M |
| Capital Expenditures | $3.7M | $9.2M | $19.0M |
| Cash from Investing | $-3.7M | $-16.0M | $-19.1M |
| Debt Issuances | $5.0M | $13.0M | $0 |
| Debt Repayments | $11.0M | $25.5M | $0 |
| Share Buybacks | $21.0K | $58.0K | $854.0K |
| Dividends Paid | $0 | $0 | — |
| Cash from Financing | $-6.4M | $-13.4M | $-521.0K |
| FX Effect | $-208.0K | $-53.0K | $-30.0K |
| Net Change in Cash | $3.5M | $-1.3M | $4.6M |
| Beginning Cash | $14.7M | $18.3M | $16.9M |
| Ending Cash | $18.3M | $16.9M | $21.6M |
Frequently Asked Questions
How does GRAHAM CORP make money?
Primary revenue streams include core industrial component manufacturing, specialized distribution services for energy clients, and aftermarket support solutions. The company utilizes a mix of operational cash flow ($24.3M) and strategic capital expenditures ($19.0M) to sustain these divisions while managing significant accounts receivable balances.
What are the main risks for GHM?
Concentration risk in key industrial sectors could impact revenue stability if demand for aerospace or energy components slows. High levels of current liabilities ($136.2M) relative to cash require careful working capital management to avoid liquidity constraints. The company carries a retained earnings deficit of $94.2M, which may limit future dividend payouts or restrict share repurchase programs.
What is GHM's competitive advantage?
Strong balance sheet liquidity with $21.6M in cash provides flexibility for acquisitions or debt reduction, supported by a healthy current ratio. The company demonstrates improving operational efficiency as the CFO-to-net-income ratio improved significantly from recent lows, indicating better cost management. Significant goodwill ($25.5M) suggests a history of acquiring valuable market positions or specialized technology that drives long-term value.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.