Forum Energy Shares Soar 192.5% in a Year: Time to Hold or Exit?

Forum Energy Technologies, Inc. FET provides highly engineered products to support the operations of oil and natural gas and renewable companies. The company’s offering includes consumable products used in activities such as drilling, well construction and completion, along with capital products for constructing or upgrading rigs and subsea construction projects.

In the past year, the FET stock has shown an impressive surge of 192.5%, surpassing the industry’s 39.9% growth. The stock of the a global manufacturing firm has outperformed its peers, National Energy Services Reunited NESR and NOV Inc. NOV, which have grown a whopping 168.9% and 27.1%, respectively. It would be wise to evaluate the fundamentals and overall business environment for the stock before coming to an investment decision.

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Geopolitical Disruptions Pose Near-Term Headwinds for FET

The demand for the company’s product offerings is heavily reliant on the drilling activity of oil and gas companies. Several factors, including geopolitical developments, commodity prices and supply-demand dynamics, influence drilling activity in the United States and international markets. During its fourth-quarter earnings results, FET mentioned that it expects global activity levels to remain relatively flat in 2026. Market conditions have changed since the start of the conflict between the United States and Iran. The conflict in the Middle East, damage to oil production infrastructure and disruption of oil supply through the Strait of Hormuz have rattled the global commodity markets.

While oil prices have increased significantly since the start of the war, the outlook for companies like Forum Energy, which provide products and services to oil and gas operators, offshore drilling contractors, and oilfield service providers, has not improved meaningfully. The conflict has led several regional producers to curb output and reduce activity levels, which could negatively impact FET’s international revenues. Prolonged disruptions may continue to weigh on capital spending and drilling activity, limiting the company’s near-term growth prospects.

Declining U.S. Rig Count Poses Risks to FET’s Revenues

The conflict in the Middle East and oil supply disruptions have led to a surge in oil prices in recent weeks. The outlook for drilling activity has not improved simultaneously, given that the long-term outlook for oil and gas prices remains extremely uncertain at present. In recent years, there has been a slowdown in drilling activities, as upstream players mainly focus on stockholder returns rather than boosting output, affecting revenues and product sales for companies like Forum Energy.

The rig count data, provided by Baker Hughes, indicates a year-over-year decline in the North American market, including the United States. Forum Energy’s geographic revenue split indicates that 51% of its revenues come from the United States. A declining rig count and conservative spending by upstream players are likely to weigh on the demand for the company’s products and result in softening of its revenues from this segment.

Image Source: Forum Energy Technologies, Inc.

Time to Wait or Exit?

The current geopolitical situation may hamper the company’s performance due to limited drilling activity, affecting its near-term prospects. Conservative spending by upstream companies is expected to affect the demand for oilfield services and products, thereby hurting FET’s revenues and product sales.

FET’s current valuation indicates that the stock may be undervalued, at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 9.40X, above the broader industry average of 10.47X. Notably, NESR and NOV currently trade at a trailing 12-month EV/EBITDA of 8.46X and 6.98X, respectively.

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Given the stock’s near-term risks, investors should avoid owning the stock at present. FET currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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