Breaking Down Graham Corporation (GHM) Financial Health: Key Insights for Investors

If you are looking at Graham Corporation (GHM), you need to cut through the noise and focus on the core numbers that tell the real story of their strategic shift. The company closed its fiscal year 2025 (FY2025) with a material financial improvement, posting total revenue of $209.9 million, a solid 13% increase, and net income that climbed to $12.2 million, demonstrating strong execution on their pivot toward mission-critical fluid and vacuum technologies for the Defense and Space sectors. This shift is defintely paying off, but the real near-term opportunity-and risk-is in the massive order book: the backlog hit a record $500.1 million as of the most recent quarter, which is a huge pile of future revenue that needs flawless conversion. You have to ask: can they manage the operational complexity to translate that backlog into profit, especially given the inherent lumpiness (or variability) of large defense and space contracts? That's the key question for investors right now.

Revenue Analysis

You need to know where the money is coming from, especially when a company like Graham Corporation (GHM) is executing a multi-year strategic plan. The direct takeaway is that Graham Corporation's top line is firmly in growth mode, driven overwhelmingly by its Defense segment, which is the clear anchor of the business.

For the fiscal year 2025, Graham Corporation reported total annual revenue of $209.9 million, marking a strong year-over-year growth rate of 13% compared to the prior fiscal year. This growth is significantly higher than the company's historical performance in the early 2020s, showing that their focus on mission-critical technologies is paying off. It was a defintely solid performance.

The company's revenue streams are clearly diversified across three core end markets: Defense, Energy & Process, and Space. However, a quick look at the growth drivers shows you exactly where the investment thesis lies right now. The Defense segment is the key engine, while the Energy & Process segment is showing early signs of recovery and stability.

• Defense: The primary revenue source, centered on critical U.S. Navy programs.
• Energy & Process: Provides stability through capital equipment and aftermarket sales.
• Space: A high-growth area, bolstered by the P3 Technologies acquisition.

Here's the quick math on how the segments contributed to the $24.4 million total revenue increase in fiscal 2025:

The Defense segment alone accounted for the vast majority of the top-line expansion, increasing its revenue by $22.4 million, which is a 23% jump from the prior year, driven by the addition and ramp-up of new programs. This strength is what gives the company's backlog its record size and high visibility. The segment's robust performance, in fact, implies Defense revenue was approximately $119.8 million in FY 2025, making it over half of the total revenue.

You also need to note the strategic changes in how Graham Corporation reports its revenue. They consolidated the legacy Refining, Chemical/Petrochemical, and Other markets, including New Energy product sales, into a single, more streamlined Energy & Process market. This simplifies the reporting, but the key is that aftermarket sales to this new Energy & Process segment, along with Defense, remained strong at $12.1 million for the full year, a critical source of recurring revenue. The Space industry is also gaining momentum, with its sales increasing 11% year-over-year, partly due to the P3 Technologies acquisition, which contributed $2.8 million to the overall revenue increase.

The main risk here is concentration: the Defense segment's success is paramount. But honestly, with a record backlog of $412.3 million at the end of fiscal 2025, the near-term revenue visibility is excellent. For a deeper dive into the company's valuation, check out our full post: Breaking Down Graham Corporation (GHM) Financial Health: Key Insights for Investors.

Profitability Metrics

You're looking for a clear picture of Graham Corporation's (GHM) earnings power, and the fiscal year 2025 results show a significant, multi-year turnaround in profitability. Simply put, GHM is getting much better at turning sales into profit, driven by strong demand in their high-margin Defense and Space segments.

For the fiscal year ending March 31, 2025, Graham Corporation reported total revenue of roughly $209.9 million. This top-line growth translated into a substantial increase in all key profitability metrics, a clear signal that the strategic focus on execution and pricing is paying off. The net income for the year was $12.2 million.

Here's the quick math on their core margins for FY2025, which gives you the precise view on how efficiently they're managing costs:

Operational Efficiency and Margin Trends

The most compelling story here is the operational efficiency and the upward trend in the Gross Profit Margin. This margin, which shows how well they manage the cost of goods sold (COGS), expanded by a notable 330 basis points in FY2025 compared to the prior fiscal year. That's defintely a strong indicator of pricing power and better execution.

This isn't a one-off event; it's a structural improvement. You can see the multi-year progress in their Gross Profit Margin:

• FY2022: 7.4%
• FY2023: 16.2%
• FY2024: 21.5%
• FY2025: 25.2%

The jump from 7.4% in 2022 to 25.2% in 2025 is a massive win for cost management, leveraging higher volume, and improved pricing, plus they benefited from a $1.3 million grant related to their Defense welder training programs. They are clearly executing better on their long-term strategic plan. If you want to dig deeper into the company's direction, check out their Mission Statement, Vision, & Core Values of Graham Corporation (GHM).

Benchmarking Against Industry Averages

To understand the quality of GHM's 25.2% Gross Margin, we need to compare it to their peers in the Industrial Machinery and Defense sectors. The median Gross Margin for the broader Machinery, Equipment, and Supplies industry in 2024 was around 30.1%, and the Aerospace & Defense industry average is about 28.8%.

GHM's Gross Margin is still slightly below these benchmarks, but their Net Profit Margin of 5.81% is actually quite competitive. For context, the median Net Profit Margin for the Machinery, Equipment, and Supplies industry in 2024 was 4.1%. GHM's superior Net Margin suggests they are managing their operating expenses (Selling, General, and Administrative costs) more tightly than the industry median, which helps them keep more of their gross profit as net income.

The near-term opportunity is clear: continue the margin expansion trajectory. They need to close that remaining 3-5 percentage point gap in Gross Margin to truly be a best-in-class performer. The risk is that the strong tailwinds from large Defense and Space orders, which are driving volume leverage, could slow down. The action for you is to monitor their quarterly Gross Margin, especially in the Energy & Process segment, to ensure the trend remains positive.

Debt vs. Equity Structure

You want to know how Graham Corporation (GHM) funds its growth, and the short answer is: mostly with its own money. As of late 2025, Graham Corporation operates with an exceptionally conservative capital structure, meaning it relies heavily on shareholder equity and internal cash flow, not debt. This is a massive de-risking factor for investors.

While the company ended its fiscal year 2025 (March 31, 2025) reporting no debt outstanding, more recent data from the quarter ending September 2025 shows minimal leverage. The company's total debt is negligible, especially compared to its equity base.

• Short-Term Debt & Capital Lease Obligation (Sep. 2025): $1.4 million
• Long-Term Debt & Capital Lease Obligation (Sep. 2025): $4.9 million
• Total Stockholders Equity (Sep. 2025): $127.6 million

Here's the quick math: the total debt of roughly $6.3 million against $127.6 million in equity is a very small figure.

Debt-to-Equity Ratio: A Clear Advantage

The core metric here is the Debt-to-Equity (D/E) ratio, which measures a company's financial leverage (how much debt it uses to finance assets relative to the value of shareholders' equity). Graham Corporation's D/E ratio for the quarter ended September 2025 stands at a remarkably low 0.05.

To be fair, a low D/E ratio is typical for companies in the Industrial Products sector, but Graham Corporation is still well below the benchmark. The median D/E ratio for the Industrial Machinery & Supplies & Components industry in 2025 is around 0.5002.

This means for every dollar of shareholder equity, Graham Corporation uses only five cents of debt, while the average peer uses about 50 cents. This low leverage provides significant financial stability and flexibility. It's defintely a strong balance sheet.

Financing Strategy and Liquidity

Graham Corporation's strategy clearly favors funding its capital expenditures and growth initiatives through retained earnings and equity, minimizing interest rate risk. This is a conservative approach that pays off in economic downturns.

The company has not engaged in any significant debt issuances or refinancing activity recently because it simply hasn't needed to. Instead, it maintains a strong liquidity position, with access to a substantial revolving credit facility. As of June 30, 2025, Graham Corporation had $44.3 million available on its revolving credit facility after accounting for outstanding letters of credit. This untapped capacity acts as a powerful safety net and a source of capital for opportunistic moves, like acquisitions or major capital projects, without the immediate cost of carrying debt.

What this estimate hides is the potential for the company to take on more debt to accelerate growth, but for now, the balance is firmly weighted toward financial strength and a low-risk profile. For a deeper dive into the drivers behind this financial strength, you can read more in our full analysis: Breaking Down Graham Corporation (GHM) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You need to know if Graham Corporation (GHM) can cover its near-term obligations, and the latest data from the quarter ended September 30, 2025, shows a tight but manageable liquidity position, primarily due to a substantial, long-cycle backlog. The company is debt-free, which is a huge strength, but its day-to-day liquidity relies heavily on converting its large work-in-progress inventory into cash.

The company's liquidity ratios, which measure its ability to meet short-term debts, are on the lower end of what a conservative analyst prefers. The Current Ratio, which compares total current assets to total current liabilities, stands at 1.05 as of September 30, 2025. This means Graham Corporation (GHM) holds $1.05 in current assets for every dollar of current liabilities. Here's the quick math: Current Assets of $159,448 thousand divided by Current Liabilities of $151,944 thousand.

The Quick Ratio (or Acid-Test Ratio), which strips out inventory-often the least liquid current asset-is a more telling figure. As of September 30, 2025, the Quick Ratio is only 0.77, indicating that without selling existing inventory of $42,428 thousand, the company cannot cover all its current bills with its most liquid assets (cash, receivables, etc.). This isn't defintely a red flag for a manufacturer with a long production cycle like Graham Corporation (GHM), but it's a number to watch. Working capital (Current Assets minus Current Liabilities) remains positive but slim at $7,504 thousand.

• Current Ratio: 1.05 (September 30, 2025)
• Quick Ratio: 0.77 (September 30, 2025)
• Working Capital: $7,504 thousand (Positive, but thin)

Cash Flow Statement Overview: Trends and Strengths

The cash flow statement for the first six months of fiscal 2026 (ended September 30, 2025) reveals the underlying dynamics of the business. Cash Flow from Operations (CFO) was positive at $11,341 thousand, which is a healthy sign that core business activities are generating cash, though this figure is a composite of a negative Q1 and a strong Q2. This volatility is common when dealing with large, milestone-based defense and space contracts.

Cash Flow from Investing (CFI) shows a net outflow of $(11,148) thousand for the six-month period. This outflow is largely due to capital expenditures (CapEx) as the company invests in capacity expansion and productivity improvements to support its record $500.1 million backlog. This is a strategic use of cash, not a liquidity concern, but it does absorb internally generated funds.

Cash Flow from Financing (CFF) showed a net use of cash of approximately $(1,170) thousand. The most important factor here is the company's minimal debt. Graham Corporation (GHM) continues to operate with no debt outstanding as of September 30, 2025, and maintains access to $44.7 million on its revolving credit facility. This zero-debt position offers tremendous financial flexibility and is the primary source of solvency strength, easily offsetting the lower Quick Ratio. The company can easily tap its credit line if a short-term liquidity pinch arises from working capital timing.

For a deeper dive into who is betting on this debt-free, backlog-driven growth, you should check out Exploring Graham Corporation (GHM) Investor Profile: Who's Buying and Why?

Valuation Analysis

You're looking at Graham Corporation (GHM) and wondering if the market has gotten ahead of itself, especially after a strong run. My analysis suggests that while the stock has seen significant price appreciation, its current valuation multiples indicate it is trading at a premium to its historical averages, signaling a need for caution. The key takeaway is that Graham Corporation (GHM) is priced for growth, not value, which means any operational misstep could trigger a sharp correction.

The stock has been a winner for the last year, with the price increasing by a remarkable 46.41% over the last 12 months as of November 2025. This performance has pushed the share price into a new range, with the 52-week high sitting at $64.66 and the low at $24.78. Honestly, that kind of move in a year suggests investors are excited about their defense and space market exposure, but it also increases the risk profile.

Here's the quick math on where Graham Corporation (GHM) stands based on its latest trailing twelve months (TTM) data, which is the most current picture we have:

• Price-to-Earnings (P/E) Ratio: The TTM P/E ratio is around 50.71. This is high, especially compared to the fiscal year (FY) 2025 P/E of 25.69, suggesting that the market is banking on a massive jump in future earnings to justify the price.
• Price-to-Book (P/B) Ratio: The P/B ratio is currently at 5.37. This multiple is defintely elevated, indicating investors are paying more than five times the company's net asset value.
• Enterprise Value-to-EBITDA (EV/EBITDA): The TTM EV/EBITDA is high, sitting at 30.82. This metric, which is capital structure neutral, tells you that the company's total value (Enterprise Value) is over 30 times its operating cash flow proxy (EBITDA), which is a rich valuation for an industrial company.

To be fair, the market is forward-looking. The valuation multiples are stretched, but the analyst consensus still leans positive. The average price target is $60, with a consensus rating of 'Buy' or 'Strong Buy' from the analysts covering the stock. This suggests Wall Street believes the company's backlog and growth in its defense and clean energy segments will eventually grow into the current valuation.

What this estimate hides is the dividend situation. Graham Corporation (GHM) is not a stock for income-focused investors. The company has not paid a dividend in the past year, so the current TTM dividend yield is 0.00%, and the payout ratio is not applicable. They are clearly prioritizing capital expenditure and growth over returning capital to shareholders, which is typical for a company focused on expansion and new market capture.

For a deeper dive into the company's fundamental strength, you can read the full report at Breaking Down Graham Corporation (GHM) Financial Health: Key Insights for Investors.

Here is a summary of the key valuation metrics for Graham Corporation (GHM) as of November 2025:

Your next step is clear: Compare these high multiples to the projected revenue and earnings per share (EPS) growth for the next two fiscal years to see if the growth justifies the premium. If the growth forecast is strong enough, the valuation is simply aggressive; if not, it's overvalued.

Risk Factors

You're looking at Graham Corporation (GHM) and seeing a strong backlog-a record $412.3 million at the close of fiscal 2025-which is great, but a seasoned investor knows to flip the script and focus on what could derail that growth. The company has made a successful strategic pivot, but that very success introduces new, concentrated risks you need to understand.

The biggest near-term risk is defintely the customer concentration in the Defense sector. This isn't a secret, as the company has been intentionally shifting its focus away from the more cyclical Energy & Process markets. But, when one customer segment dominates your revenue, any hiccup there becomes a major financial event.

Here's the quick math on how much the Defense industry now drives the business, based on the fiscal 2025 10-K filing:

• Defense sales accounted for 58% of total sales in fiscal 2025.
• Sales to the more cyclical Energy & Process markets were approximately 35% of revenue in fiscal 2025.

This heavy reliance means any change in U.S. Navy program funding, a contract cancellation, or even a slowdown in the procurement process could immediately impact GHM's top line. It's a high-reward strategy, but it brings high concentration risk.

Operational and Execution Hurdles

The second major risk is operational execution, which is a common challenge when a company is in a high-growth phase. Graham Corporation is actively investing to meet the massive demand, especially from the Defense and Space sectors, but these projects create execution risk.

The company is expanding its Batavia, New York, campus with a new 30,000 square foot manufacturing facility, and building a new cryogenic testing facility in Florida. If they can't complete these facilities on time, or if the ramp-up of new capacity is slower than expected, it directly threatens their ability to convert the record backlog into revenue. This is a classic capacity-vs-demand squeeze.

To mitigate this, GHM is showing its thinking by making smart, targeted investments. They're investing in automation and new technical capabilities like advanced radiographic testing, and they expect these high-return projects to deliver returns above 20%.

External Market and Financial Pressures

While the company's balance sheet remains strong-they reported no debt outstanding as of September 30, 2025-external financial and market pressures are still a factor. One clear, measurable headwind is the impact of tariffs, which is a direct cost to the business.

The estimated impact of tariffs on the consolidated financial statements for the first six months of fiscal 2026 was approximately $1.0 million. That's a real drag on margin that you have to factor into your model. Also, while the Energy & Process segment is smaller, its cyclical nature means that a global economic downturn could see those 35% of sales drop off quickly, forcing a greater reliance on the Defense pipeline.

The company's strategy to increase non-customer funded Research & Development (R&D) is a positive mitigation step to maintain a technological edge and diversify product lines. Non-customer funded R&D spend was $1,124 thousand in fiscal 2025, a significant jump from $904 thousand in fiscal 2024. This investment is their insurance policy against becoming a one-trick pony. For a deeper dive into the valuation, check out Breaking Down Graham Corporation (GHM) Financial Health: Key Insights for Investors.

Growth Opportunities

You're looking for a clear map of where Graham Corporation (GHM) is heading, and the answer is simple: the company has successfully pivoted its core business toward high-margin, mission-critical sectors. This strategic shift, primarily into Defense and Space, is the single biggest driver for its future financial performance, backed by a record-setting order book.

For the full fiscal year 2025 (FY2025), Graham Corporation raised its revenue guidance to between $200 million and $210 million, which reflects a projected topline growth of about 11% at the midpoint over the prior year. That's a defintely strong signal. More importantly, the company's adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is expected to land between $18 million and $21 million for FY2025, implying a substantial 47% increase at the midpoint. Here's the quick math: revenue is up, but profitability is surging even faster.

Strategic Pillars: Defense, Space, and Innovation

The company's growth isn't abstract; it's grounded in concrete strategic moves and a massive backlog. At the close of Q4 FY2025, the total backlog hit a record $412.3 million, with a full 83% of that tied to the Defense segment. This is what gives the company excellent revenue visibility.

• Defense Dominance: Revenue in this segment grew 28% year-over-year in Q4 FY2025, driven by key programs like the U.S. Navy's Virginia Class Submarine. The long-term nature of these government contracts provides a stable, multi-year revenue stream.
• Space Expansion: The commercial space business is accelerating, with the Barber-Nichols LLC subsidiary securing approximately $22 million in new orders from leading space customers in the second and third quarters of fiscal 2026. This shows the successful integration of the Barber-Nichols acquisition.
• Product Innovation: Graham Corporation is launching new products, such as the NextGen steam ejector nozzle, which alone represents a new market opportunity of over $50 million.

Plus, the company is actively expanding its capabilities. This includes a new 30,000 square foot advanced manufacturing facility in Batavia, New York, to support Navy programs, and a strategic acquisition of Xdot Bearing Technologies in October 2025, which enhances its high-speed bearing technology for aerospace and defense. They are building capacity to match the order flow.

Competitive Advantages and Earnings Outlook

Graham Corporation maintains a strong competitive position, largely due to the mission-critical nature of its products (fluid, power, heat transfer, and vacuum technologies) and its deep expertise. In the defense sector, there are significant switching costs-both financial and security-related-that create a substantial barrier to entry for competitors like Xylem or Honeywell. Their long track record and world-renowned engineering expertise in turbomachinery and cryogenic pumps are their core moats.

Looking ahead, analysts project a solid earnings trajectory. The consensus EPS forecast for the next fiscal year (FY2026) suggests an increase from $1.07 per share to $1.18 per share, representing a 10.28% growth rate. This continued growth is expected to be supported by a long-term organic revenue growth target of 8% to 10% annually.

To understand the players betting on this growth story, you should check out Exploring Graham Corporation (GHM) Investor Profile: Who's Buying and Why?

Finance: Track the conversion rate of the Defense backlog into revenue each quarter to confirm the growth thesis.