Galliford Try: A builder that's worth a try

Galliford Try Plc development in Camden — (Image credit: Luke MacGregor/Bloomberg via Getty Images)

Galliford Try (LSE: GFRD) is a construction business that has managed to get things right. It is a UK-based company that specialises in a wide range of projects, such as the construction of schools and prisons. Its business is divided into three segments: constructing and renovating buildings and facilities; running infrastructure (primarily roads and sewage systems) and providing specialist services (such as maintenance). This set-up comprising three divisions ensures that the group is not too dependent on a single project or one type of service, and avoids the opposite trap of becoming sprawling or unfocused.

The construction sector offers investors a compelling long-term outlook. Most major economies urgently need to repair or replace ageing infrastructure, thereby making up for decades of underinvestment. At the same time, there is a chronic shortage of housing in many countries, especially the UK. But the sector is not without risk. Construction firms are prone to cost overruns, while housebuilders can also be affected by short-term turbulence in the housing market.

Galliford Try is on a buying spree

Galliford has bolstered its business through buying a range of smaller firms in related areas and has plans to expand its efforts in affordable housing. This is a shrewd move as the government has made building more affordable housing a priority. The group's high rate of repeat customers and bulging order book both suggest that its clients are happy with the level of service it is providing, and offer a degree of insulation against an economic downturn. In addition to planning to keep increasing sales, Galliford is also trying to expand its margins through a combination of volume growth, high efficiency and focusing on more profitable work. Galliford's revenue grew by more than two thirds between 2021 and 2025, while it more than doubled its adjusted earnings per share during the same period. At the same time, it has managed to become more efficient when deploying its capital. Its return on capital employed has climbed to well above 20%. This in turn has enabled the company to quadruple its dividend.

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Despite this success, the stock still looks attractive from a valuation perspective, trading at a more than reasonable 13.4 times expected 2027 earnings, with a solid dividend yield of 4.1%.

Galliford's operational strength, strong future prospects and favourable valuation have translated into significant market momentum, with the share price up by around half over the past year. The stock has continued to do better than the overall market over the last six months and is also trading above both its 50-day and 200-day moving averages. I would therefore suggest that you go long at the current price of 538p at 5p a share. In that case I would put the stop-loss at 340p, which gives you a total downside of £990.

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