Strong data center demand can prop shares of Forgent Power Solutions higher, Goldman Sachs said. The bank initiated the power infrastructure company, which designs electrical distribution equipment used in data centers and energy-intensive industrial facilities, at a buy rating. Its 12-month price target of $48 implies upside of 40% from here. Forgent Power Solutions went public last month on the New York Stock Exchange. Since its first trading day on Feb. 5, the stock has added 27%. FPS 1M mountain FPS 1M chart Analyst Joe Ritchie believes that Forgent is well-positioned in the attractive electrical distribution equipment industry. The industry’s total addressable market currently sits at around $35 billion, and he forecasts this to grow around 17.5% through the end of the decade. “Forgent is one of a few companies that can deliver (most products manufactured internally) the entire electrical powertrain for a data center, a capability that is critical for customers who prioritize speed, reliability, and single-source accountability,” he wrote. “U.S. electricity demand is projected to increase significantly, driven by data centers and industrial electrification, which necessitates substantial investment in both new power generation and the transmission and distribution (T & D) network.” Ritchie added that the reshoring of U.S. manufacturing provides another robust and long-term demand driver for Forgent. The company is also nearing completion on a $205 million investment program to dramatically expand its own manufacturing footprint, designed to support up to $5 billion in annual sales and providing ample opportunity for Forgent to take share. Ritchie also argued that Forgent’s custom, engineer-to-order business model positions the company for significant margin expansion as volumes scale. He sees all of these factors propping up Forgent’s valuation picture in the next few years. “Relative to peers, we believe FPS’ sales and EBITDA growth will significantly outpace the group in the coming years driven by faster top-line growth and margin expansion,” Ritchie wrote. “While FCF conversion is negative today due to the recent manufacturing capacity build-out, we believe investors should look out to 2027 when assessing the true FCF profile and earnings power of the company.” Goldman Sachs was one of the top initial public offering underwriters last month.
