What do you think about the Argan (AGX)?

An interesting discussion has launched on Reddit about the investments in Argan (AGX) company.

According to an analysis that participants in the analysis have made, it could be a good company to consider of. However, make sure that you have informed about the reliability of the projections that members of this forum showed and final conclusion that they have made at the end.

One of the members started a discussion with the question about the reliability and long-term safety with investments in Argan (AGX) company. As they concluded, this company has very little downside, attractive upside potential, along with the great projections on long-term. As he saw, their current trading is $40 with $28 per share.

Other participants in the discussion confirmed his conclusion, noticing that the company has good management and surely smart capital allocation track record. On the other hand, they noticed that the company has a great balance sheet and high inside ownership.

As it is usual in these talks and discussions, which is their great side and surely one of the reasons for the starting the question on Reddit at first place, there is an opponent of these excellent claims. There are people that were concerned about end markets. They asked what their advantages are over large contract manufacturer.

The most important question when new companies are is if it is a cyclical business. The right answer is that it is more than cyclical. It means that they have more than one started project, which ends successfully and then start with the new one. It could be difficult to track for traders and investments. However, they are currently at the end of their most recent cycle, so it looks like they are finished the jobs and stopped.

Even though there are claims that Argan does not have to earn a lot per share, they have a lot of projected finished and that is an answer. On the other hand, it means that they started bad substantial startup cost, meaning not a lot of fees earned from projects. There are commenters that remind on their backlogs which is declined 64% during the current year and that must be the starting point when these companies are about.

Do not forget that Argan is a company based on conversion from coal-fired to nat-gas fired option, which earns a lot of money but in the future, not right now. It is hard to project possible earnings of the company annually when their investments are on long-term only. Power plant takes multiple years to build. After current works, they have they will start the new ones, and earnings will be visible after years of investing.

There are surely on right tracks, even though that is not visible right now. If we look at their competitors, Fluor and Aecom, they are dropping out, which is good news for Argan. They just finished Chickahominy plant and that brings money for the future. On warnings that they have more than 50% of the money in cash, some knowers answer that is because of cyclical projects.

There are still many disadvantages, though. It is hard to track nat-gas vs coal vs mood pulp vs nuclear plant popularity and change types of investments in years to come. Even if you invest in this company, be prepared for small earnings and do not put these stacks more than 15% in the portfolio.

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