AI Summary
5 min readWhen the Government Becomes Your Co-investor
Forgent Power Solutions reported fiscal fourth-quarter results that beat both Wall Street's expectations and its own guidance, swinging into profitability and forecasting 75% year-over-year revenue growth in fiscal 2027. The electrical equipment manufacturer—which makes switchgear, circuit breakers, and transformers—added $1.5 billion in bookings during the quarter, up 375% year over year, producing a book-to-bill ratio of 3.3. Its backlog now exceeds $3 billion, up 53% sequentially, and adjusted EBITDA margins came in above 24%, well ahead of the upper-teens margins typical for comparable companies.
But the analysts on this episode of Motley Fool Hidden Gems Investing were more interested in what the numbers didn't say. Where did that $1.5 billion in new backlog come from? If it's concentrated among one or two hyperscale data center operators, customer concentration risk is real. And there's a tension between Forgent's accelerating growth guidance and the simultaneous news cycle about slower AI development, political resistance to data center projects, and project delays. The resolution, as Matt Frankel explained, is timing: the orders hitting Forgent's backlog now were greenlit six to eighteen months ago, when capital allocation decisions were made in 2025. Forgent's guidance reflects that existing backlog, not a live read on c
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What you'll learn
- 1 (00:01) **Government as Co-Investor: A New Era?** - Tyler introduces the theme of the government taking equity stakes in private companies, framing it as a potentially permanent shift for investors.
- 2 (00:46) **Forgent Power Solutions Earnings** - The crew dives into Forgent’s stellar fiscal Q4 and full-year 2026 results, which beat expectations and showed strong future guidance.
- 3 (03:04) **Forgent's Valuation and Unanswered Questions** - The panel discusses Forgent's valuation and the key risks that remain despite the impressive backlog.
- 4 (05:38) **Squaring Forgent's Growth with AI Skepticism** - The hosts reconcile Forgent's accelerating growth with news of political resistance and delays in data center development.
- 5 (10:51) **Elmet Group's $450 Million DOD Investment** - The conversation shifts to Elmet Group, which jumped 32% after announcing a major investment from the U.S. Department of War to build a vertically integrated supply chain.
- 6 (13:06) **Is Government Co-Investment a Permanent Shift?** - The panel debates whether the Trump administration's equity-taking approach is a temporary phenomenon or a permanent change in the investment landscape.
- 7 (20:35) **The L3 Harris Win-Win Example** - The hosts discuss a specific deal where government involvement was structured to be mutually beneficial.
+ Full timestamped outline available in the app
Guests on this episode
Show Notes
The US government and governments all over the world have played some active role in the day to day decision making at businesses for years. What we haven’t seen, though, is the US government take active equity stakes in businesses and so directly shape the capital allocation decisions. That has changed under the current administration and has profound impacts on how these business work. Matt, Lou, and Tyler break down the consequences of governments shaping business decisions as an equity investor. Plus, earnings from a Hidden Gems favorite and a listener question
Have a question? Email us; [email protected]
Tyler Crowe, Lou Whiteman, and Matt Frankel discuss:
- Forgent Power solutions earnings and outlook
- The administration's active role in business deals
- Mailbag: How to deal with volatility
Companies discussed: FPS, ELMT, MP, INTC, BA, EADSY
Host: Tyler Crowe
Guests: Lou Whiteman, Matt Frankel
Engineer: Dan Boyd
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