Glasshouse Research released a short report on Granite Construction (NYSE:GVA) on Wednesday, stating the company faces "substantial revenue and earnings headwinds."
The firm, which issued a Strong Sell opinion on the stock, argues in the report that GVA is a company "marked with recent accounting failures" and has an "elevated risk of potential restatements."
"Granite's shaky balance sheet portends recent premature revenue recognition by management," Glasshouse wrote. "This is coupled with cost overruns, delays, and missed milestones on many of its major projects."
They believe that "granite is one of the worst offenders" in a market abundant with underbidding, delays, cost-overruns and suspect dealings.
The firm also pointed to the company's accounting issues after it settled with the SEC for $12 million in relation to charges regarding the company's alleged misrepresentation of its financial condition from 2017 to 2019.
Furthermore, they claim that while the company has said it has made changes, "Granite management used similar accounting gimmicks to appear to turn around a company that previously reported depressed margins and earnings."
"When we analyze Granite's unsavory past, contract assets/liabilities diagnostics, and lackluster cash flow, we find a company that we believe has been manipulating its accounting for significant gains to the income statement," alleges Glasshouse Research.
Despite the report, investors have been unmoved, with GVA shares up 2% on Wednesday.