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Argan, Inc. (AGX)

NYSE - NYSE Delayed Price. Currency in USD
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50.02-0.85 (-1.67%)
At close: 4:00PM EST
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  • J
    Joseph
    I like to invest in cash heavy, simple balance sheets. This strategy hasn't been optimal lately, but I'll stick to it.

    When I think about the operations of Argan, I put it into a category I call "ESG adapters." Loosely stated, these are companies who are having to shift their strategy or product mix to meet the market/policy demands around ESG. In Agran's case, they are a best-in-class EPC firm who will have to shift into green construction projects, while continuing to operate their traditional gas-fired business. I firmly believe they can do this.

    There are other companies I hold that are working through the same issue:

    Calm-Maine (CALM): shifting from caged egg production to cage-free,
    Altria (MO): shifting customers from smoking to non-combustibles,
    Exxon (XOM): building renewables alongside hydrocarbons

    The key is to pivot while continuing to dominate your traditional market. This is tricky and requires patience.
  • D
    DN
    Folks, any thoughts on the latest seeking alpha post on AGX?
  • J
    Joseph
    Just spent the morning reading back over the most recent quarterly report and I see nothing that makes me waver on my conviction of the short and mid term outlook for Argan. With $28 of cash per share, there's a floor on the stock that should encourage even the most risk averse investors (like me).
    All they have to do is execute.
    Not my area of expertise, but selling off one of the more unproductive business units might juice the stock a bit as well.
  • J
    Joseph
    Make that a 17% earnings yield, plus a 2% dividend, plus announced buy back program, plus a special dividend that might annualize to another 5-10% yield.
  • J
    Joseph
    Ex cash, AGX is trading @ ~15% earnings yield, or 6.4 PE
  • J
    Joseph
    A very small detail from the 10-Q, but relevant nonetheless:

    "We believe that it is important to note that the plans for two of our contracted natural gas-fired power plant projects will
    adopt integrated green hydrogen solution packages developed by a major gas turbine manufacturer. While the plants will
    initially run on natural gas alone, it is planned that the plants will eventually burn a mixture of natural gas and green
    hydrogen, thereby establishing power-generation flexibility for these plants."
  • M
    Matt
    I don’t see any news. I know we’ve been in a range the last couple months. But anyone have an idea of what’s driving today’s move?
  • L
    Leonard
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    Bullish
  • Y
    Yahoo Finance Insights
    Argan is up 4.95% to 48.32
  • J
    Joseph
    As a value investor, I've found that sometimes it takes longer than you want for a thesis to play out. However, I've noticed that around the time I begin to doubt my conviction or get fatigued by the delay, the inflection point happens. The point is, I'm buying heavily now at these levels.

    Here's something to consider: the low for this stock was $29.91. That occurred in March when the world was ending. Today, AGX has $28 of CASH per share. So you would have been pay a buck for all future income streams. So, I feel comfortable penciling in $30 as the max draw down on the stock.

    If you back out the cash, you're now paying about $18/share for the business. I think the business will easily book between $2.00 - $3.00/share of Net Income for the next few years....even if they do not grow the backlog. Hopefully, we'll get some positive news regarding new projects. In the meantime, we'll be paid to wait.

    I'm allocating cash to average down into another 6,000 shares starting today.
  • J
    Joseph
    As usual, investors in AGX only get a paragraph of comment from management. While I understand and appreciate Bosselmann's conservative description of future business, the utter lack of color forces me to weigh each word carefully. I also tend to compare the tone of the comments across the years. Given that, I'm concerned when he says "timelines have proven to be longer than originally anticipated and it is possible that some of these projects ultimately will not be built." Naturally, I understand that backlog can be removed at any time prior to written Approval to Proceed. However, I get alarmed when I hear Bosselmann say this. Is he signaling a big reduction in the backlog? Is he covering his tail for a disappointing future? That isn't my base case, but his comment does give me pause.
  • J
    Joseph
    I'm back amigos....30 day period no the sidelines is complete.
    How're we feeling about AGX these days? We've made it back to pre-covid levels on the stock. YOY revenues ought to be impressive this quarter.
    Unless there's been serious impairment to the backlog, I'm still bullish.
    Side note: Saw a ton of volume earlier in the week. Can AGX repurchase it's shares leading into the earnings week?
  • J
    Joseph
    Earnings should be out soon. I'm looking for about a $1 EPS. Not sure how the backlog is holding up. Don't think COVID affects the core operations of this company, but surely will impact the outlook for Gemma's customers. All in all, this stock is set up to really run if they can get the green light on another project or two.
  • J
    JD
    Based on past history, earnings should be this week, possibly even today.
  • J
    Jazenevd
    Earning release seems to be clear enough: constructing one plant is not enough to break even. I do not have enough experience here, but it seems company constructed 4-5 plants simultaneously in good times. It makes this investment case: once they announce start of second plant construction, whatever it is, one may expect break-even results; until then expect red inks. Could this stock be bought while red inks are in place? It is doable, but I would prefer in this case to see share price getting closer to book value, e.g. declining to high 20s before purchase could be made.
    In total, either second plant or 20s.
  • F
    Frank
    AGX beats on revenue ($116.459mm v $101.600mm) and EPS ($2.07 v $0.34). Cash is still strong and report says that they are expecting to start work on another $1.5 bln in projects in 2019. TTM EPS gives it a 10 P/E. TTM EPS x-cash gives it a 5 P/E. Expecting growth and higher prices!
  • J
    Joseph
    The Chickahominy project got approval to proceed from the Virginia DEQ. Final document in link.
    I'm not familiar with the process, but isn't this the main hurdle to overcome? Can we pencil in another ~$500 MM in backlog at this point. Or is this project still at major risk?

    https://www.deq.virginia.gov/Portals/0/DEQ/Air/Chickahominy_Power_Plant/Documents/52610_Chickahominy_Power_Station_final_issued_permit.pdf
  • M
    Matt
    Does anyone here see any threat to this stock from Coronavirus? Apart from the risk of short term construction delays, which I think are unlikely, I don’t see a scenario where the current project backlog and financial performance are affected by the same forces that are driving the market selloff. And I certainly don’t think it affects their ability to pick up new contracts longer term. Thoughts?
  • F
    Frank
    I am wondering if there is any color on AGX's upward daily price movement? The market is down 300 points today and AGX is up 0.46. Was there tax loss selling in December? Does anyone think that some of those sellers are getting back in now that the 30 day period is ending? Volume starts low but gets heavy later in the day. Are there any announcements coming from AGX? Either way I like the price action in a mixed market.
  • A
    Andy
    Beautiful. Huge beat by Argan. The company was expected to post net income of $0.40 per share for Q2. AGX posted the Q2 results after the close of the market today. They brought in more than $16 million. This comes to $1.08 per share. They beat analysts’ estimate soundly, posting 270% of the consensus analyst estimate. This is a HUGE beat. The company has higher bookings and has hugely beaten expectations. AGX is likely headed to over $50 per share this year.