The FOMO (fear of missing out) trade is alive and well. That’s pushed valuations to the brink. According to Yardeni Research, the S&P 500’s forward P/E ratio as of July 31 was 22.5x, while the technology sector’s was 30.0x. Both are higher than they’ve been since 2004. 

To further emphasize the state of valuations at present, I calculated the average P/E ratio (those with positive earnings) of the top 10 stocks in Barchart’s Top 100 Stocks to Buy. It is 193.3x, almost seven times the S&P 500’s forward P/E. Fifty-six of the top 100 aren’t profitable over the trailing 12 months. 

One of the 44 profitable names is Argan (AGX), a Maryland-based holding company with a primary focus on building and construction. It generates revenue from three reportable segments: Power Industry Services (79% of 2024 revenue), Industrial Construction Services (19%), and Telecommunication Services (2%).  

A growing piece of its business is construction-related services for data centers. That’s provided through its largest operating segment: Power Industry Services. With AI guzzling electricity at data centers across the country, the company has kept very busy, with a project backlog of $1.86 billion as of Q1 2026, or nearly three times its 2024 revenue. 

This acceleration in growth explains why Argan shares trade at 33.1 times its projected 2026 EPS estimate of $6.97 and 28.3 times its 2027 estimate of $8.15. It competes in a very popular sandbox.

The data center play has been on a tear since breaking out of a six-year stall in early 2024. Up 66% year-to-date and 387% since the beginning of 2024, Argan stock looks ready to take a break. 

Here’s my two cents on whether now is a good time to buy its stock.

Priced for Perfection?

Although the company's history dates to May 1961, the holding company’s present form came to be in December 2006 when it acquired Gemma Power Systems LLC (GPS) for $33.1 million, which included $12.9 million in cash and the issuance of $20.2 million (3.67 million shares of Argan stock). 

In fiscal 2008 (January year-end), GPS generated 87% of Argan’s $206.8 million in annual revenue. It paid 5.5 times sales for Gemma. Argan stock currently trades at 3.73 times sales. By comparison, two peers that I’ve recommended in the past 24 months, Limbach Holdings (LMB) and Sterling Infrastructure (STRL), trade at 2.56x and 4.35x, respectively, so Argan’s right in the middle based on sales. 

As for earnings, according to S&P Global Market Intelligence data, its forward P/E has only been higher than it is today on four occasions: March 2019, March 2020, June 2020, and September 2020. 

While its P/S multiple isn’t in nosebleed territory, its forward P/E is relatively high, if not excessive. It’s something to keep in mind as the tariffs begin to get their hooks into the economy. 

One metric I focus on to get an idea of a stock’s valuation is free cash flow yield, which is defined as free cash flow divided by enterprise value. Based on Argan’s enterprise value of $2.57 billion and a trailing 12-month free cash flow of $178.5 million, its free cash flow yield is 6.9%. I consider anything 8% or higher to be in value territory. 

On valuation, it remains a stock whose future potential suggests it still has room to run, but only if the economy cooperates. Those backlogs can disappear in a hurry once the economy hits the skids. 

Profitability Continues to Improve

Over the past five years, Argan’s revenue and earnings have grown by 266% and 337%, respectively. That’s some growth. Of the top 100 stocks to buy, Argan is one of only seven stocks to generate a return on assets of 10% or higher. Sterling Infrastructure is another. 

Further, Argan is one of only five top 100 stocks to buy with 5-year revenue and earnings growth exceeding 100%. Not even Sterling was able to do so. That’s another big positive for owning its stock. 

On June 4, Argan reported its Q1 2026 results. They were excellent. 

Revenues increased by 23% to $193.7 million, its gross margin was 19.0%, 760 basis points higher than Q1 2025, and its EBITDA (earnings before interest, taxes, depreciation and amortization) was $30.3 million, 155% higher year-over-year, with an EBITDA margin of 15.6%, 810 basis points higher than a year ago.

And, as I mentioned earlier, it finished the quarter with a $1.86 billion backlog, 36% higher than Q1 2025. 

“After several years of underinvestment, there is an immediate need for the development of new energy resources, and Argan’s energy-agnostic capabilities and proven track record of success position us well as we compete for the construction of large and complex power generating facilities,” stated CEO David Watson. 

I must admit, I’m a tad biased about the construction industry. My wife owns a small construction firm here in Halifax. She’s never short of business. Given the combination of AI with a housing shortage in North America, capable construction firms should be busy for the next decade or more. 

Sure, a recession will cause a temporary setback of 6-12 months, but the overall potential, especially for those businesses focused on infrastructure, as Argan is, should keep them very busy. 

The bottom line: If you’re prepared for a long-term hold with Argan, I don’t think it’s too late to buy its stock. Your patience will be rewarded.