Granite Construction Does Symmetrical Triangle Breakout On Pocket Pivot
Granite Construction stock did a Symmetrical Triangle breakout today on a bullish pocket pivot signal. The breakout has occurred after the company has reported a string of contract wins over the last couple of weeks.
Analysts love Granite Construction stock. Based on their most recently released notes to investors, 6 analysts have a rating of outperform, 4 analysts have a rating of “buy”, 1 analyst has a rating of “hold”, and no analysts rate the stock as either “underperform” or “sell”.
Granite Construction reported earnings today which missed. The company reported EPS of $0.35 versus the $0.60 estimate. However, revenue beat coming in at $762.9 million versus the $678.4 million estimate.
Strong growth is taking place in Granite Construction in 2017. The company reports increased revenue opportunities and a backlog that has crossed above $4 billion for the first time in Granite’s 95 year history!
Granite is one of the largest construction companies in the US but its market cap is only $2.24 billion as of August 1, 2017. That’s a good valuation when you consider that the company’s market cap is about half of its current backlog.
Contracts are pouring in to the company. Here are some of the most recent contract wins:
Jul-31-17 = Granite Awarded $441 Million Joint Venture Design-Build Transit Project in Washington D.C.
Jul-31-17 = Granite Awarded $318 Million Bridge Project in Brooklyn
Jul-27-17 = Granite Awarded $20 Million Dam Project in Northern California
Jul-18-17 = Granite Awarded $855 Million Joint Venture Design-Build Highway Project in Texas
Jun-09-17 = Granite Construction Wins $36M Contract from Caltrans
Jun-07-17 = Granite Awarded $54 Million Highway Rehabilitation Project in Alaska
Can you imagine how big Granite Construction’s backlog will grow if we get a $1 trillion infrastructure spending program?
Public transportation and infrastructure spending overall remains steady and stable, and it will increase significantly in Washington and California.
California’s $52 billion SB 1 transportation bill was passed in April of 2017. The recently enacted 2017-2018 California budget included an increase in state transportation capital funding from less than $2 billion last year to more than $4 billion this year. Here’s the crazy thing. The $4 billion backlog does not include any SB 1 projects yet because California has said that almost half of the $4 billion will not be available for projects until the first six months of 2018.
Spending Needed To Upgrade Infrastructure
The $1 trillion infrastructure spending is only a fraction of what is needed to repair America’s aging infrastructure. The ASCE published this graphic for how much money is needed now to repair this country’s infrastructure. Note: All numbers are in billions.
The ASCE estimates that we will need to spend $4.59 trillion to update our old infrastructure.
Granite Construction Stock
Huge buying took place today after the earnings report. Notice the bullish pocket pivot (blue dot) today. The rising large player volume as the stock was dropping totally predicted the big breakout move today.
Unfortunately GVA is not a good setup right now. Prices have extended too far to the upside. For a better entry, add it to your watch list and wait for a consolidation. This market is too dangerous to be chasing any overvalued stock.
What are your thoughts on infrastructure spending and do you have an infrastructure stock you’re tracking? Leave your comments below. To find more good stocks to buy check out this lesson.
Granite Construction Review
- Profitability (Return On Assets, Return On Equity, and Profit Margin)
- Valuation (P/E, Forward P/E, PEG, Book Value, Price to Book Ratio)
- Growth (EPS and Revenue)
- Health (Current Ratio, Quick Ratio, Debt to Equity, Altman-Z Score)
GVA has a Return On Asserts of 2.53%. This is better than the industry average of 1.15%. GVA's Profit Margin of 123.68% is one of the best in the industry. GVA does better than the industry average Profit Margin of 116.25%. GVA has a Return On Equity of 4.85%. This is inline with the industry average of 4.85%.
The PEG Ratio, which compensates the Price/Earnings for growth, indicates a correct valuation of the company. When comparing the current price to the book value of GVA, we can conclude it is valuated correctly. It is trading at 2.42 times its book value. With a Price/Earnings Ratio of 50.91, GVA can be considered very expensive at the moment. With a Price/Earning Ratio of 50.91, GVA is valued higher than the industry average, which is at 30.96. 100% of the companies listed in the same industry are cheaper than GVA! The Forward Price/Earnings Ratio of 30.60 indicates a quite expensive current valuation of GVA. When comparing the price book ratio of GVA to the average industry price book ratio of 1.83, GVA is priced more expensively than its industry peers. Still, if you consider the market cap of the company at $2.24 billion when it has a backlog of more than $4 billion, it seems like a good valuation but we can't ignore the other valuation indicators mentioned above.
The EPS is expected to grow by 43.29% on average over the next 2 years. This is a very high rate of growth and EPS growth is accelerating: in the next 2 years the growth will be better than in the last year. Measured over the past 5 years, GVA shows a small growth in EPS. The EPS has been growing by 1.68% on average per year. GVA shows a small growth in Revenue. Measured over the last 5 years, the Revenue has been growing by 5.03% yearly. Nevertheless, the EPS for GVA have decreased by -108.61% in the last year.
GVA has a Current Ratio of 2.05. This indicates that GVA is financially healthy and has no problem in meeting its short term obligations. The Current Ratio of GVA is much better than the industry average of 1.63. GVA has better rating than 87% of its industry peers. The Quick Ratio of GVA is much better than the industry average of 1.41. GVA has a better rating than 87% of its industry peers. With a Debt to Equity ratio of 0.25, GVA is doing better than the averages in the industry. The industry average is 0.47. GVA has an Altman-Z score of 4.02. This indicates that GVA is financially healthy and little risk of bankruptcy at the moment. The Altman-Z score of GVA is much better than the industry average of 3.01. GVA has better rating than 87% of its industry peers. A Quick Ratio of 1.93 indicates that GVA should not have too much problems paying its short term obligations.
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