Argan Stock Surges 49% in 6 months: Should Investors Ride the Rally?

Shares of Argan, Inc. AGX have surged 49% in the past six months, well above the Zacks Building Products - Miscellaneous industry’s 18.2% growth. The stock has further outperformed the broader Construction sector and the S&P 500, which have advanced 12.4% and 14.3%, respectively, in the same period.AGX Stock Outperforms Peers, Industry & MarketImage Source: Zacks Investment ResearchWhile the broader construction environment remains mixed, demand linked to power generation and grid reliability continues to hold up well. Tariffs, elevated input and labor costs and lingering inflation create some pressure, but infrastructure spending tied to electricity demand and system upgrades remains resilient. Recent rate cuts have also improved conditions at the margin, supporting longer-term project activity despite near-term cost challenges.This Virginia-based power and infrastructure services provider is seeing steady momentum as demand for reliable power generation and grid infrastructure continues to build. Rising electricity consumption from data centers, AI workloads and electrification is supporting activity across large, complex natural gas projects, where Argan’s EPC capabilities provide a competitive edge. A diversified mix spanning gas, renewables, industrial construction and telecom infrastructure helps support stability as the company advances its next phase of growth.Notably, during the past six months, Argan also outperformed a few of the other market players, including TopBuild Corp. BLD, Frontdoor, Inc. FTDR and Gibraltar Industries, Inc. ROCK. During the said time frame, TopBuild and Frontdoor have gained 35.7% and 4.4%, respectively, while Gibraltar has tumbled 11%.Let us dive into understanding the factors that are driving Argan’s momentum.Power Construction Demand Supports Argan’s Core GrowthArgan benefits from rising demand for power generation infrastructure, driven by growing electricity needs tied to data centers, electrification and grid reliability. The company focuses on large, complex EPC projects, primarily in natural gas-fired power plants, where technical expertise and execution discipline remain key differentiators.In the third quarter of fiscal 2026, Argan’s backlog expanded meaningfully with the addition of several large power projects, including new gas-fired facilities. Management highlighted that increasing load growth, delayed renewable build-outs and the retirement of aging plants are reinforcing demand for dispatchable power. Looking ahead, the company expects power construction activity to remain resilient, supporting a steady flow of awarded projects as utilities and developers prioritize reliability.Record Backlog Improves Multi-Year Revenue VisibilityArgan’s backlog provides strong visibility, supported by a growing mix of large, multi-year power projects. The company maintains a disciplined approach to backlog growth, focusing on projects with clear execution timelines and manageable risk profiles.At the end of the third quarter of fiscal 2026, Argan reported a record backlog of approximately $3 billion, representing more than 6 gigawatts of generation capacity. Management expects to maintain roughly 10-12 active projects at any given time. This backlog supports predictable revenue progression and provides strong visibility extending into calendar year 2027.Natural Gas Projects Drive Argan’s Project MixNatural gas-fired power plants remain the primary contributor to Argan’s backlog, reflecting demand for reliable, dispatchable power. These projects are increasingly viewed as essential to support intermittent renewable generation and rising electricity consumption from data centers and industrial users.Approximately 79% of Argan’s backlog is tied to gas-fired facilities as of the third quarter of fiscal 2026. Ongoing work includes multiple large combined-cycle plants across key U.S. regions, with several projects progressing through early construction phases. Management expects gas-fired projects to remain the primary driver of backlog in the near to medium term, supported by utility planning cycles and continued emphasis on grid stability.Industrial and Telecom Segments Add Revenue DiversificationArgan is expanding beyond power construction through its Industrial Construction Services and Telecommunications Infrastructure Services segments. These businesses provide diversification and incremental growth opportunities alongside the core power portfolio.In the third quarter of fiscal 2026, Industrial Construction Services revenues increased 19% year over year to $49 million, supported by demand from agriculture, petrochemical, water and data center-related projects. Telecommunications Infrastructure Services revenues rose 76% year over year to $6.3 million, driven by work for utility, federal and secure infrastructure customers. Together, these segments enhance revenue stability and broaden Argan’s market exposure.Taking a Look at Argan Stock’s ValuationAGX stock is currently trading at a premium compared with its industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 31.47, as shown in the chart below.Image Source: Zacks Investment ResearchFurthermore, Argan stock appears overvalued compared with peer companies, with TopBuild, Frontdoor and Gibraltar trading at a forward P/E of 24.37, 14.94 and 11.9, respectively.Analysts Project Upside Despite Premium ValuationDespite its high valuation, Argan’s upward revisions in earnings per share (EPS) estimates highlight analysts’ confidence in the stock. AGX’s earnings estimates for fiscal 2027 have trended upward in the past 60 days to $10.18 from $9.40 per share. This indicates expected earnings growth of 23.2% year over year on projected revenue growth of 37.4%.Image Source: Zacks Investment ResearchHow to Play AGX Stock?Argan’s strong recent rally reflects solid execution, rising demand for power generation and grid reliability, and improving visibility supported by a record backlog. Exposure to large, complex natural gas projects, along with diversification across industrial and telecom services, strengthens the company’s growth profile despite a mixed construction backdrop.While the stock trades at a premium, upward earnings estimate revisions and strong revenue momentum suggest that fundamentals continue to support the valuation. With a Zacks Rank #1 (Strong Buy), AGX remains well positioned for investors seeking exposure to power infrastructure-driven growth, as long-term demand trends and execution strength continue to play out. You can see the complete list of today’s Zacks #1 Rank stocks here.Zacks Names #1 Semiconductor StockThis under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Gibraltar Industries, Inc. (ROCK): Free Stock Analysis Report Argan, Inc. (AGX): Free Stock Analysis Report TopBuild Corp. (BLD): Free Stock Analysis Report Frontdoor Inc. (FTDR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks