TechnipFMC currently trades at $75.35 and has been a dream stock for shareholders. It’s returned 1,040% since August 2021, blowing past the S&P 500’s 72.8% gain. The company has also beaten the index over the past six months as its stock price is up 23% thanks to its solid quarterly results.
Is there a buying opportunity in TechnipFMC, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is TechnipFMC Not Exciting?
Despite the momentum, we don’t have much confidence in TechnipFMC. Here are two reasons why FTI doesn’t excite us, plus one stock we’d rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
Cyclical industries such as Energy can make mediocre companies look great for a time, but a long-term view reveals which businesses can actually withstand and adapt to changing conditions. Unfortunately, TechnipFMC struggled to consistently increase demand as its $10.42 billion of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and signals it’s a lower quality business.
2. Low Gross Margin Reveals Weak Structural Profitability
In any given year, energy gross margins are heavily influenced by prices, hedging, and cost inflation, but over a full cycle these gross margins reveal which producers are structurally advantaged through superior “rock” quality, infrastructure access, and cost position.
TechnipFMC, which averaged 18.7% gross margin over the last five years, exhibited bottom-tier unit economics in the sector. It means the company will struggle at higher commodity prices than peers with better gross margins.
Final Judgment
TechnipFMC’s business quality ultimately falls short of our standards. With its shares outperforming the market lately, the stock trades at 22.1× forward P/E (or $75.35 per share). This valuation tells us a lot of optimism is priced in - we think other companies feature superior fundamentals at the moment. We’d suggest looking at one of our all-time favorite software stocks.
Stocks We Like More Than TechnipFMC
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