In the world of long-term investing, few strategies have received as much respect as the one presented by legendary fund manager Peter Lynch. His method, outlined in One Up on Wall Street, centers on finding companies with lasting growth, sound financial condition, and fair prices, a philosophy often called Growth at a Reasonable Price (GARP). The central thought is to locate businesses that are increasing steadily but are not excessively promoted or costly, letting patient investors gain from accumulated returns over many years. This technique stresses basic examination over predicting market movements, looking for companies that are earning money, not carrying too much debt, and selling at a price that matches their growth possibility without too much guesswork.
A recent filter using Lynch's standards has identified TechnipFMC PLC (NYSE:FTI) as a possible choice. The UK-based energy service company offers complete projects, products, and services for the production and processing of hydrocarbons, functioning through its Subsea and Surface Technologies divisions. For investors following a GARP philosophy, the question is if this company's basic measures match the careful, long-term structure Lynch supported.
Match with Peter Lynch's Main Standards
The filter uses particular, number-based conditions taken from Lynch's ideas. TechnipFMC's profile shows a strong match across many of these important measures, which are made to select for lasting growth and financial steadiness.
- Lasting Earnings Growth: Lynch liked companies increasing at a good, continued speed, usually between 15% and 30%. TechnipFMC's earnings per share (EPS) has increased at an average yearly rate of about 25% over the last five years. This puts it clearly within Lynch's desired range, showing a firm and regular rise in earnings that is neither still nor impossibly fast.
- Fair 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 might be priced low given their growth rate. A PEG ratio at or under 1.0 is seen as good. TechnipFMC's PEG ratio, based on its past five-year growth, is about 0.94. This hints the market may not be completely valuing its historical growth path, a key sign for price-aware growth investors.
- High Earnings (Return on Equity): Lynch searched for companies that effectively produce profits from shareholder ownership. A Return on Equity (ROE) above 15% was a standard for high quality. TechnipFMC's ROE of 28.4% greatly passes this mark, showing a very earning operation that creates large value for its owners.
- Careful Financial Setup (Debt/Equity): Financial strength is key in a long-term portfolio. Lynch chose companies with little debt, often looking for a Debt-to-Equity ratio below 0.25. TechnipFMC's ratio of 0.14 is very low, displaying a balance sheet paid for mainly by ownership rather than debt. This gives a major safety margin against economic drops or increasing interest costs.
- Enough Short-Term Financial Condition (Current Ratio): To make sure a company can meet its upcoming duties, Lynch highlighted cash availability. A Current Ratio of at least 1.0 is the basic need. TechnipFMC's ratio of 1.13 shows it has enough short-term assets to pay its short-term debts, passing this basic condition check.
Basic Condition and Market Setting
A wider view of TechnipFMC's basic report, which can be examined closely here, gives a detailed picture that mainly supports the Lynch filter's results. The company gets a firm total basic rating of 6 out of 10, with its notable feature being earnings ability. Its Return on Invested Capital (ROIC) of 14.5% is with the top in its field, and both profit and operating margins have shown recent betterment.
The financial condition score is sufficient, supported by the very low debt amounts and a firm Debt-to-Free-Cash-Flow ratio. However, experts point out some small worries about cash metrics like the Quick Ratio, which are behind industry equals. On price, the picture is not uniform: while the standard P/E ratio seems high, the more meaningful PEG ratio and expected P/E comparisons suggest a more fair price when growth is included. The growth profile is good, with firm past EPS growth, though future sales growth forecasts are more moderate.
This examination happens within a market situation where the S&P 500's short-term direction is good, but its long-term direction stays neutral. For a Lynch-style investor, such market distraction is less important than the company-specific basic measures, which call for a focus on the business's inherent qualities instead of trying to predict the wider market.
A Choice for the Long-Term Investor
For an investor looking for growth at a fair price, TechnipFMC offers a strong example. It meets the strict, number-based conditions of a Peter Lynch-inspired filter by showing a multi-year history of firm earnings growth, high earnings ability, a very strong balance sheet with little debt, and a price that seems fair when its growth rate is reviewed. These are the building blocks Lynch thought could result in good long-term investments, as they find companies with the financial power and operational quality to build value over time.
It is key to recall that a filter is a beginning for study, not a final action sign. Lynch himself stressed the need to know the business you invest in. Possible investors in TechnipFMC would need to look further into the repeating pattern of the energy equipment field, the company's competitive place, and its plan for operating within the energy shift.
Interested in reviewing other companies that fit this careful investment method? You can use the full Peter Lynch strategy filter yourself here.
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 original money. You should do your own complete study and think about talking with a qualified financial consultant before making any investment choices.
