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Forum Energy Technologies, Inc.’s (NYSE:FET): Forum Energy Technologies, Inc. designs, manufactures, and distributes products to the oil and natural gas industry in the United States and internationally. The US$688m market-cap company announced a latest loss of -US$374.1m on 31 December 2018 for its most recent financial year result. As path to profitability is the topic on FET’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for FET’s growth and when analysts expect the company to become profitable.
FET is bordering on breakeven, according to the 12 Energy Services analysts. They expect the company to post a final loss in 2019, before turning a profit of US$31m in 2020. So, FET is predicted to breakeven approximately a few months from now. In order to meet this breakeven date, I calculated the rate at which FET must grow year-on-year. It turns out an average annual growth rate of 120% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
I’m not going to go through company-specific developments for FET given that this is a high-level summary, but, keep in mind that generally oil and gas companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing I would like to bring into light with FET is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in FET’s case is 50%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on FET, so if you are interested in understanding the company at a deeper level, take a look at FET’s company page on Simply Wall St. I’ve also put together a list of key aspects you should further examine:
- Valuation: What is FET worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether FET is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Forum Energy Technologies’s board and the CEO’s back ground.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.