Forum Energy Technologies NYSE: FET outlined a five-year growth strategy centered on market-share gains, international expansion, product innovation and capital allocation, while CEO Neal Lux said the company expects continued demand for equipment that improves energy-production efficiency.
Speaking at an investor presentation hosted by Three Part Advisors, Lux said Forum operates through two primary segments: artificial lift and downhole, which sells directly to energy producers, and drilling and completions, which sells to oilfield service companies. Drilling and completions represents about 60% of company revenue, he said.
About half of Forum’s sales are generated in the United States and half internationally, according to Lux. He said roughly 80% of revenue comes from activity-based consumables, including higher-value products that wear out and are replaced over periods of months, while the remainder comes from capital equipment designed to improve operational efficiency.
Financial performance and valuation
Lux said Forum’s revenue rose from about $540 million in 2021 to a 2026 guidance midpoint of approximately $890 million. EBITDA increased from roughly $20 million in 2021 to a 2026 guidance midpoint of $120 million, while EBITDA margins expanded from about 4% to 13%, he said.
The CEO said the company has produced 10% compound annual revenue growth, compared with about 7% for the Russell 2000, and adjusted cash flow growth of approximately 46%, compared with zero growth for the index. Lux attributed the gains to market-share growth, acquisitions, operating leverage and what he described as a capital-light business model.
He also cited annualized five-year stock performance of 16% for Forum compared with 6% for the Russell 2000, and one-year performance of 158% compared with 39% for the index.
Despite the share-price gains, Lux argued that Forum remains relatively undervalued against manufacturing peers. He said the company generates about three times more free cash flow per share than those peers on an adjusted cash flow yield basis, while trading at roughly half of peer levels on enterprise value to EBITDA and price-to-sales measures. He added that Forum’s financial leverage is about half that of its manufacturing comparables.
Capital allocation and growth plan
Forum began a share repurchase program at the end of 2024, Lux said. Since then, the company has repurchased about 1 million shares, reducing its share count from 12.3 million to 11.3 million, or by about 8%.
The company has also focused on debt reduction, with its leverage ratio declining from 3.9 times at the end of 2019 to 1.1 times currently, according to Lux. He said net debt has declined 67% and that Forum has completed five accretive acquisitions at multiples below its own valuation multiple.
Lux said the company’s “Beat the Market” strategy focuses on targeted markets with relatively few competitors, differentiated products, continuous innovation and a global manufacturing and distribution footprint. Forum has facilities in the U.S., Canada, the U.K., Germany, Saudi Arabia and the UAE, plus distribution in Asia, he said.
As an indicator of market-share gains, Lux said revenue per global rig increased 27%, from $365,000 in the second quarter of 2023 to more than $464,000 in the most recent quarter. Revenue per U.S. rig is approximately $700,000, compared with about $350,000 per international rig, leaving what Lux described as a significant international growth opportunity.
Products and international opportunities
Among the company’s growth initiatives, Lux highlighted cased-hole wireline products used in hydraulic fracturing. He said Forum has two competitors in North America for the high-pressure, high-temperature cable technology and has begun shipping the products to Argentina and the Middle East.
Forum is also pursuing an opportunity in stationary power generation for data centers. Lux said the company developed a stationary heat-transfer unit for engines used to generate electricity at data center sites and recently received its first order for the product.
He characterized data center demand as a longer-term opportunity, saying growth could begin to build over the next couple of years and potentially accelerate in years two and three of the company’s outlook. Forum is not the sole supplier to Caterpillar for related equipment, Lux said, explaining that the company typically sells radiators to packagers that combine engines, radiators and controls.
Forum divides its portfolio into leadership markets, where it holds a 36% share of a $1.6 billion addressable market, and growth markets, where it has an 8% share of a $3 billion addressable market. Lux said the company aims to sustain its share in leadership markets and double its share in growth markets to 16% over five years.
Under a flat-market scenario, Lux said Forum believes it can grow revenue 5% through share gains alone, reaching about $1 billion by 2030 from roughly $800 million. Under its growth-market scenario, the company expects 15% growth and believes revenue could reach $1.6 billion by 2030, with EBITDA quadrupling and free cash flow tripling.
Lux also said Forum is seeking broader Wall Street research coverage, though no corporate investor day has been scheduled.
About Forum Energy Technologies (NYSE:FET)
Forum Energy Technologies Inc is a global provider of advanced products and services to the oil and gas industry. The company's offerings span the full lifecycle of exploration and production, including drilling, well construction, completion and production, and subsea operations. Key product lines include premium drill bits, downhole drilling motors, directional drilling tools, subsea umbilicals, and pressure control equipment, complemented by field service support and engineered solutions for complex projects.
Established through the merger of Forum Oilfield Technologies, Triton Group, Global Energy Group, and Allen International in 2010, Forum Energy Technologies has built a diversified technology portfolio designed to meet evolving industry requirements.
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