Forgent Power Solutions (FPS) – Looks like a buy

The stock I have started looking at is FPS. As you all know, the real bottleneck right now is actually the heavy-duty electrical gear for power grids since there is a significant power constraint for data centers. They basically build the "powertrain" for data centers, which is a fancy way of saying they make all the switchgear, transformers, and power skids that take electricity from the grid and feed it into the servers.

According to GS, about 50% of DCs will be activated after the first 8 quarters after scheduling and the reason behind it is power. This ends up creating a backlog for FPs. Because Forgent manufactures these "non-optional" components, and does it with shorter lead times than most, they have a ton of pricing power.

What’s cool about Forgent is that they aren't just making generic parts. About 78% of what they do is custom-engineered, which lets them charge higher margins. They’ve been spending like crazy to ramp up capacity, recently expanding to ten manufacturing campuses.

If this subreddit let me post a pic, I would show you their product offering but they are basically making everything. The only products that aren't applicable to DCs are their transformers because they are limited to 10 MVA, while most of them require 100+ MVA.

Their recent quarter was:

Revenues of $296 million, an increase of 69% year-over-year

Bookings of $762 million, an increase of 268% year-over-year

Backlog of $1.5 billion, an increase of 100% and 45% year-over-year and quarter-over-quarter, respectively

Book-to-bill ratio of 2.6x, an increase of 58% quarter-over-quarter

Net Loss of $(0.1) million, a decrease of $6.5 million year-over-year

Adjusted EBITDA of $60 million, an increase of 51% year-over-year

Adjusted Net Income of $36 million, an increase of 66% year-over-year

Margins don’t look exciting but this is a company that has been spending a bunch of money to ramp up capacity and spending money on increasing headcount (this doesn’t happen without strong demand).

But the commentary from the management was promising,

“Following completion of the capacity expansion plan, the Company believes it will have the footprint to support up to $5 billion of annual revenues and expects capital expenditures to fall significantly to maintenance levels.”

Additionally, they have strong balance sheet as well. Current ratio > 1, meaning they don’t have a liquidity issue and all the short term assets(less than 12 months) can be sold to cover all their short term liabilities.

Analyst estimates have net income at $260M for 2027 and revenue at $1.8B. This suggests ~7% profit margin, and for a company set to have a significant backlog increase next quarter (reporting on May 14, 2026) and continued growth, a 25x multiple would have it at ~$45B MC, which is almost 3.5x higher than the current price.