GHM

Graham's top line is the genuine bright spot: revenue has compounded from $123M in FY2022 to $245M in FY2026 (+16.9% YoY), and the strategic pivot is working — Defense is now ~60% of sales (vs ~25% in FY2021) with a 21% Defense increase this year, while Energy & Process rides New Energy/SMR momentum (+14%). The FlackTek acquisition (~$30M annualized revenue, recurring consumables) and Xdot add durable, higher-visibility revenue. This is a better, more diversified business than it was five years ago, and the balance sheet carries little debt (long-term debt $13.0M, liabilities/equity 1.31x).

The problem is that none of that growth is reaching the bottom line, yet the stock is priced as if it will. Despite +16.9% revenue, operating income fell 1.1%, diluted EPS rose just 0.9% to $1.12, and net income grew only 2.2%. Management itself attributes the 170bp gross-margin decline to mix (more lower-margin Defense sales and material receipts), plus ~$1M incremental tariff drag and the non-repeat of a $1.3M BlueForge grant. SG&A jumped $4.5M on staffing and performance comp. The result is a 6.1% operating margin and 5.1% net margin on a business the market is valuing at 107x earnings and 5.7x sales.