Is Argan (AGX) Overvalued or Undervalued Amid Strong Earnings and AI-Driven Growth?

The energy infrastructure sector is undergoing a seismic shift as artificial intelligence (AI) and healthcare technologies converge to redefine power demand. At the center of this transformation is Argan (AGX), a leader in combined cycle gas turbine (CCGT) power generation. With a forward non-GAAP P/E ratio of 39.49 and an EV/EBITDA of 33.07 as of November 2025, AGX's valuation appears elevated relative to traditional benchmarks. However, in a sector where growth expectations outpace historical norms, the question is not whether AGX is expensive, but whether its premium reflects the scale of its future potential.

Valuation Metrics: A Premium Justified by Growth?

Argan's current EV/EBITDA of 33.07 starkly contrasts with the healthcare sector's EBITDA multiples, which range from 6.2x to 10.4x for medtech and medical device firms according to industry analysis. Yet this comparison is inherently flawed. Argan operates in a hybrid space-power infrastructure with AI-driven healthcare applications-where valuation logic diverges from traditional healthcare metrics. Goldman Sachs, which recently initiated coverage of AGX with a "Buy" rating, argues the stock's premium is warranted by its exposure to surging demand for CCGT capacity. The firm projects Argan could achieve a 21% EBITDA compound annual growth rate from 2026 to 2030, driven by its expanding backlog and strategic wins in Texas power projects.

The forward P/E ratio of 39.49 as reported by Seeking Alpha, while above the five-year average for its sector, aligns with high-growth tech and infrastructure stocks that trade at multiples reflecting future cash flows. For context, AI infrastructure firms like NVIDIA (NVDA) often command P/E ratios exceeding 50x due to their dominance in cutting-edge markets. Argan's case is similar: its backlog of $12.5 billion (as of Q3 2025) and its role in powering AI-driven healthcare facilities position it as a critical node in the energy-AI ecosystem.

Industry Context: Navigating a High-Growth, Low-Benchmark Sector

The AI-driven power infrastructure sector lacks standardized valuation benchmarks, complicating direct comparisons. While medical device and medtech firms trade at lower EBITDA multiples, they also offer more predictable cash flows. Argan, by contrast, is capitalizing on a dual tailwind: the global push for reliable energy to support AI workloads and the healthcare sector's reliance on uninterrupted power for data centers and advanced diagnostics.

Goldman Sachs highlights that Argan's business model is uniquely positioned to benefit from these trends. For instance, the firm notes that AI's energy consumption is projected to grow 10x by 2030, creating a "virtuous cycle" where increased AI adoption drives demand for CCGT plants to offset intermittent renewable sources. This dynamic suggests Argan's EBITDA growth could outpace its valuation multiple expansion, narrowing the gap between its current metrics and industry peers over time.

Growth Prospects: Can Argan Deliver on Expectations?

The key to Argan's valuation lies in its ability to convert its $12.5 billion backlog into sustained earnings growth. With a projected 15% revenue CAGR through 2030 according to Goldman Sachs analysis, the company must navigate near-term challenges such as supply chain bottlenecks and regulatory scrutiny of gas-fired projects. However, its recent Texas power plant wins-valued at over $2 billion-demonstrate its capacity to secure high-margin contracts in a competitive market as reported by Simply Wall St.

Moreover, Argan's pivot toward AI-powered healthcare infrastructure adds a layer of differentiation. Hospitals and research facilities increasingly require energy solutions that balance reliability with sustainability, a niche where Argan's hybrid gas-renewable systems excel. This strategic alignment with healthcare's energy needs could unlock new revenue streams, further justifying its premium valuation.

Conclusion: A High-Risk, High-Reward Proposition

Argan's valuation metrics appear stretched when viewed through the lens of traditional healthcare or energy benchmarks. Yet in a sector defined by rapid innovation and capital intensity, its EV/EBITDA of 33.07 and forward P/E of 39.49 are not outliers but rather reflections of its growth trajectory. For investors willing to accept the risks of a high-growth, capital-intensive business, AGX offers compelling upside. However, those prioritizing near-term profitability may find the current multiples unattractive until Argan's earnings catch up to its ambitious forecasts.

As the energy-AI nexus gains momentum, Argan's success will hinge on its ability to execute its backlog efficiently and adapt to evolving regulatory and technological landscapes. For now, the stock remains a bet on the future of power generation-one where AI and healthcare are reshaping the rules of the game.