The Argan Stock Rally Still Isn't Over, Even After the Stock Has Nearly Doubled This Year

Even after a pullback this past week, shares of Argan (NYSE: AGX) are up by almost 90% year to date as the AI data center build-out has boosted demand for the company's services. Argan specializes in designing and building power-generation plants of the varieties that are in high demand to supply AI infrastructure with electricity. This positioning amid what looks like it will be a prolonged period of high capital expenditures for AI infrastructure suggests that the stock's rally isn't over.

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Argan's backlog growth is fueled by long-term demand

In its fiscal 2026 (which ended Jan. 31), Argan more than doubled its backlog from $1.4 billion to $2.9 billion. The company has three segments -- teledata, industrial, and power -- and the backlogs in all three have at least doubled over the past year. This continued a strong growth trend: Its backlog almost doubled from fiscal 2024 to fiscal 2025.

The company cited data centers, electric vehicles, and manufacturing as the three catalysts that are driving demand for reliable and affordable electricity higher. Argan also noted in its fiscal 2027 Q1 presentation that a study by ICF forecast that electricity demand will increase 25% by 2030 and that the U.S. Department of Energy expects that 104 gigawatts of aging power plants will be retired by 2030. Meanwhile, per an S&P Global report, electricity demand from U.S. data centers is projected to nearly triple by 2030.

While some investors are wondering if the AI infrastructure boom will last for another year or two, Argan is already anticipating that this megacycle will continue beyond 2030. That sets the foundation for high revenue and net income growth for several years, which should add fuel to the stock's rally.

The backlog is turning into meaningful revenue growth right now

Argan has multiyear projects in its backlog, but all of that business is already translating into exciting revenue growth numbers. The company reported $291 million in fiscal 2027 Q1 revenue, up 50% year over year. Earnings per diluted share almost doubled year over year, and the company closed out its recent fiscal quarter with no debt.

The company has had a compound annualized revenue growth rate of 27.6% over the past three years. This shows that Argan has delivered steady growth for multiple years while highlighting the accelerated nature of recent results.

Investors should expect future revenue growth to be closer to 50% than to its 3-year average rate. That's because all of the catalysts carrying Argan stock to new highs will persist for years. Tech companies are still ramping up their capital expenditures, and that will result in more AI data centers being built. Those facilities will need energy, and some of it will come from the power plants and grid infrastructure that Argan builds.

Present and future demand explain why this growth stock has almost doubled so far this year. It also explains why Argan shares are up by more than 1,000% over the past five years. Yet even with those gains behind it, the company looks like it has a lot more upside to offer to patient shareholders.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.