Granite Construction's Undervalued Growth Potential Amid Infrastructure and Data Center Booms

Granite Construction (GVA) has emerged as a compelling investment opportunity in the infrastructure and construction sector, driven by a strategic M&A spree, a record backlog of projects, and valuation metrics that suggest significant undervaluation. As the U.S. infrastructure spending boom and the surging demand for data center infrastructure converge, Granite is uniquely positioned to capitalize on these tailwinds.

Strategic M&A: Fueling Infrastructure and Data Center Expansion

Granite's aggressive acquisition strategy from 2023 to 2025 has solidified its role as a key player in both public infrastructure and private data center development. The company's $278 million acquisition of Lehman-Roberts and Memphis Stone & Gravel in late 2023, followed by the $710 million purchase of Warren Paving and Papich Construction in 2025, has expanded its footprint in critical markets like the Southeast and California. These acquisitions have not only added quarries, asphalt plants, and barge logistics capabilities but also aligned with the growing demand for data center infrastructure, where Granite's materials and construction expertise are in high demand.

The Southeast, in particular, has become a focal point for Granite's growth. As CEO Kyle Larkin noted, the region's combination of cheap land, abundant power, and skilled labor is attracting private investment in data centers. Granite's recent acquisitions, such as Warren Paving, have enhanced its capacity to meet this demand, with the company projecting $425 million in annual revenue from these deals alone.

Robust Backlog and Revenue Growth: A Foundation for Future Earnings

Granite's strategic M&A activity has been complemented by a surge in its project backlog. As of Q3 2025, the company's Committed and Awarded Projects (CAP) reached a record $6.3 billion, a $718 million year-over-year increase. This growth is driven by strong public infrastructure spending under the Infrastructure Investment and Jobs Act (IIJA) and private-sector demand for data center construction.

The materials segment has been a standout performer, with revenue rising 39.1% year-over-year to $270.99 million in Q3 2025. Higher aggregates and asphalt volumes, coupled with contributions from newly acquired businesses, have fueled this growth. While Granite has not disclosed a breakdown of its backlog by infrastructure versus data center projects, the company's emphasis on the Southeast's data center boom and its CEO's comments highlight the sector's importance.

Granite's Q3 2025 results underscore its financial strength: total revenue hit $1.43 billion, up 12% year-over-year, and adjusted EBITDA surged 44% to $216 million. Despite missing revenue estimates, the company's profitability metrics and record backlog position it for sustained growth in 2026.

Undervaluation Metrics: A Compelling Investment Case

Granite's valuation appears to be at odds with its fundamentals. The company's current P/E ratio of 29.1x is below both the Construction industry average of 35.6x and the peer group average of 37.2x. A DCF analysis further suggests an intrinsic value of $137.96 per share, with the stock currently trading 23.6% below this estimate.

The price-to-book ratio also highlights undervaluation. Granite's P/B ratio of 4.36 is lower than the industry average of 5.39, indicating the market is discounting its asset base relative to peers. This discrepancy is particularly striking given the company's strong earnings growth and expanding backlog.

Conclusion: A Strategic Play on Infrastructure and Data Center Demand

Granite Construction's combination of strategic M&A, a robust backlog, and undervaluation metrics makes it an attractive investment in the infrastructure and data center sectors. As public and private demand for infrastructure projects continues to rise, Granite's expanded capabilities and geographic reach position it to outperform. With its stock trading at a discount to intrinsic value and industry peers, the company offers a compelling opportunity for investors seeking exposure to the next phase of the U.S. infrastructure boom.