TechnipFMC PLC (NYSE:FTI) Passes Key Peter Lynch Investment Criteria

For long-term investors looking for a disciplined method to choose stocks, the principles set by famous fund manager Peter Lynch provide a useful framework. His strategy, explained in One Up on Wall Street, centers on finding companies with lasting growth, good financial condition, and fair prices, a philosophy often called Growth at a Reasonable Price (GARP). It stresses fundamental analysis instead of market timing, urging investors to create a varied collection of companies they know and to keep them for the long term. A main instrument for using this approach is a stock screener that sorts for specific measures Lynch prized, like steady earnings growth, high profitability, low debt, and appealing prices compared to that growth.

One firm that recently appeared from such a filter is TECHNIPFMC PLC (NYSE:FTI), a worldwide energy service company focused on integrated projects, products, and services for the production and processing of hydrocarbons. We will look at how TechnipFMC matches the Lynch method and why it may deserve more attention from investors focused on GARP.

Match with Lynch's Main Measures

Peter Lynch's filter looks for companies expanding at a maintainable speed, funded carefully, and valued appealingly. TechnipFMC's financial picture shows a good match with these main ideas.

• Maintainable Earnings Growth: Lynch preferred companies with a demonstrated history of growth, but was cautious of extreme growth that could not continue. The filter demands a 5-year earnings per share (EPS) growth rate between 15% and 30%. TechnipFMC's EPS has increased at an average yearly rate of 24.99% over this time, putting it clearly within Lynch's desired range. This shows a solid and, notably, possibly maintainable growth path.
• Appealing Price Compared to Growth (PEG Ratio): Maybe the most important Lynch measure is the Price/Earnings to Growth (PEG) ratio, which tries to find stocks that are priced fairly given their growth rate. A PEG ratio at or under 1.0 is seen as appealing. TechnipFMC's PEG ratio, based on its last five-year growth, is 0.80. This implies the market may not be completely valuing the company's past growth, a main sign for value-aware growth investors.
• Good Profitability (Return on Equity): Lynch searched for companies that effectively produce profits from shareholder equity. A minimum Return on Equity (ROE) of 15% is a filter condition. TechnipFMC greatly passes this with an ROE of 28.42%, which places it better than 93% of similar firms in the Energy Equipment & Services industry. This high degree of profitability is a mark of a well-run company.
• Sound Financial Condition (Debt & Liquidity): A careful balance sheet was critical for Lynch. The filter sorts for a Debt-to-Equity ratio below 0.6, with Lynch himself liking levels under 0.25. TechnipFMC's ratio of 0.14 shows a capital structure funded mainly by equity, not debt, giving stability in economic declines. The filter also requires a Current Ratio of at least 1.0 to make sure short-term duties can be covered; TechnipFMC meets this level with a ratio of 1.13.

Fundamental Condition Review: A Summary

A closer look into TechnipFMC's wider fundamental situation, as described in our full fundamental analysis report, gives more detail. The company receives an overall fundamental score of 6 out of 10, pointing to a varied but somewhat positive profile when measured against its industry peers.

• Profitability is a Clear Positive: The company scores well here (7/10), with notable measures like Return on Invested Capital (14.51%) and getting better profit margins. This fits exactly with Lynch's focus on corporate efficiency.
• Financial Condition Displays Some Detail: The health score is average (6/10). The very low debt level is a big plus, leading to a very good Debt-to-Free-Cash-Flow ratio. However, liquidity measures (Current and Quick Ratios) are not as strong relative to the industry, an area for an investor to watch, though the good solvency position lessens this worry.
• Valuation is Fair: The valuation score is neutral (5/10). While the standard P/E ratio seems high, the more meaningful PEG ratio and forward P/E ratio indicate the stock is fairly to inexpensively valued, especially when thinking about its high profitability and anticipated earnings growth.
• Growth Path is Favorable: The growth score is also neutral (5/10), backed by very good past EPS growth and firm future EPS growth expectations, though revenue growth is forecast to be more limited.

Is TechnipFMC a "Simple" Company Worth Knowing?

Lynch notably told investors to search for chances in "simple" businesses that are easy to grasp. TechnipFMC works in the necessary, though changing, energy field, providing key technology and services for offshore oil and gas projects. Its business, though detailed in practice, is basically understandable: it helps energy companies locate and produce hydrocarbons effectively. For investors who accept the long-term need for energy and the particular expansion in subsea and offshore markets, TechnipFMC represents a basic supplier to the industry. Its leading market places and technical knowledge could supply the lasting competitive edge Lynch wanted.

Finding More Investment Possibilities

TechnipFMC is only one instance of a company that passes a filter constructed on Peter Lynch's principles. For investors curious about finding other possible choices that meet these measures for maintainable growth, fair valuation, and financial soundness, you can examine the filter directly here: View the Peter Lynch Strategy Screen.

Disclaimer: This article is for information only and does not form financial guidance, a suggestion, or an offer to buy or sell any security. Investing includes risk, including the possible loss of principal. You should do your own complete research and think about talking with a qualified financial advisor before making any investment choices.