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Is AGX a good stock to buy? We came across a bullish thesis on Argan, Inc. on Draco’s Substack by Derek Yin. In this article, we will summarize the bulls’ thesis on AGX. Argan, Inc.'s share was trading at $ 597.88 as of April 17th. AGX’s trailing P/E was 61.38 according to Yahoo Finance.

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Argan Inc. (AGX) is an engineering, procurement, and construction firm delivering gas-fired power plants under a lump-sum turnkey model that is increasingly benefiting from AI-driven data center power demand. As hyperscalers and independent power producers accelerate buildouts, construction costs have risen from ~$1,000/kW to ~$2,500/kW, enabling higher contract values and margin expansion in a structurally constrained supply environment.

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After significant historical losses across the industry, most EPC peers exited LSTK contracting, leaving AGX as one of the few scaled firms still executing fixed-price projects. This scarcity has become a structural advantage as developers prioritize cost certainty, while lenders favor LSTK structures that shift construction risk away from highly levered project finance vehicles, lowering financing costs and improving project viability.

AGX’s competitive positioning is further strengthened by its direct-hire labor model through The Roberts Company, which reduces exposure to subcontractor inflation in a tightening skilled labor market competing across LNG, renewables, and grid expansion projects. At the same time, hyperscalers are increasingly taking direct ownership of turbine procurement, lowering equipment exposure and allowing AGX to focus on higher-value construction execution, supporting margin capture.

Near-term visibility is reinforced by large-scale opportunities such as the Sandow Lakes multi-gigawatt project, linked to hyperscaler demand and broader data center infrastructure buildouts, which strengthens backlog growth and multi-year revenue visibility. With capacity constraints expected to persist through 2027, AGX is well positioned to continue benefiting from pricing power and margin expansion.

At ~16x forward EV/EBIT, the market does not fully reflect backlog durability or improving contract economics, implying meaningful upside as new awards reprice earnings power. While risks include commodity volatility and execution delays, structural demand growth and limited LSTK capacity create a favorable risk-reward skew.

Previously, we covered a bullish thesis on EMCOR Group, Inc. (EME) by CompanyCharts in April 2025, which highlighted U.S. infrastructure resilience, strong growth, cyclical stability, and undervaluation. EME's stock price has appreciated by approximately 110.78% since our coverage. Derek Yin shares a similar view but emphasizes AI-driven data center EPC demand and LSTK contract scarcity driving margins in Argan (AGX) structural growth tailwinds.

Argan, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 46 hedge fund portfolios held AGX at the end of the fourth quarter which was 41 in the previous quarter. While we acknowledge the risk and potential of AGX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AGX and that has 10,000% upside potential, check out our report about this cheapest AI stock.

Disclosure: None.