Forgent Power Solutions, Inc. (FPS) stock intrinsic value fair value estimate & owner earnings analysis

Forgent Power Solutions designs and builds the electrical gear that moves power from the grid into a building and around it: medium-voltage switchgear, dry-type and liquid-filled transformers, switchboards, power distribution units, generator connection cabinets and complete pre-wired "powertrain" skids and eHouses. It was assembled in 2023-2024 by its private-equity owner around MGM Transformer and the acquisitions of PwrQ, States Manufacturing and VanTran, then spent fiscal 2025 and 2026 adding 1.8 million square feet of factory space in Minnesota, Texas, Maryland, California and Mexico. In the year to June 2026, 59% of revenue came from data centers, 21% from the power grid and 10% from industrial plants; one customer was 11% of revenue. Revenue rose 89% to $1.42 billion and the order backlog reached about $3.0 billion, up 256% in a year, with customer deposits rising $153 million. Earning power. The business has only two full years in its current form. After deducting stock compensation, write-downs of obsolete inventory and bad debts (treated as real costs), and the share of capital spending needed just to keep the factories running, the cash the business produced before paying its lenders was about $94 million in fiscal 2025 and $200 million in fiscal 2026, or $0.31 and $0.66 per share across all 304.7 million economic shares (Class A shares plus the exchangeable Class B units held by the former owners, which we count as if exchanged). Because no full industry cycle has been observed and data-center building is the main driver, we use the midpoint of those two years, about $147 million, as the mid-cycle level, and let the contracted backlog lift the first few years above it. Fiscal 2026 cash earnings grew about 112%; our first projected year grows about 12% before, and falls about 7% after, funding the extra working capital the larger order book requires, well below that pace. We also charge about $8 million a year so that all earnings bear full corporate tax, and we treat the new tax-sharing agreement with the former owners ($339 million payable) as offset by the matching tax savings ($357 million deferred tax asset), so neither enters the value. Capital spending charged for upkeep ($51 million in fiscal 2026) is well above depreciation ($19 million) because the two expansion years distort the history; true upkeep may be lower, which is upside. Debt. The February 2026 IPO and three follow-on offerings did not reduce debt: every dollar the company raised was used to buy out existing owners. Forgent owes a $598.5 million term loan maturing December 2032, floating at about 6.4%, with an undrawn $250 million revolver due 2030. Against about $50 million of cash beyond operating needs and a small charge for the loan costing slightly more than 6%, we subtract roughly $560 million. Base case. The backlog carries revenue to about $1.75 billion in fiscal 2027 (the June 2026 quarter alone ran at a $1.85 billion annual pace) and holds it there in fiscal 2028, at a cash margin of about 13% of sales, the average of the two years on record. Once the backlog is worked off, nothing contracted keeps revenue at that level, so it fades over fiscal 2029-2030 back to the mid-cycle $147 million a year (about $139 million after full tax), freeing working capital as it shrinks, and holds flat thereafter on the strength of a product line every power plant, substation, factory and data center needs and replaces. Business value about $2.56 billion, less $0.56 billion owed, leaves about $2.0 billion, or $6.56 per share. Bear case. Data-center spending pauses: some backlog is deferred or cancelled (a risk the company names), the 11% customer cuts orders, revenue slides from $1.5 billion in fiscal 2027 to the fiscal 2025 level of about $750 million by fiscal 2030, margins fall to fiscal 2025's 12.5%, and cash earnings settle near $86 million a year. Interest of roughly $38 million is still covered more than twice, but refinancing in 2032 is assumed to cost about $60 million more. Business value about $1.65 billion, less about $0.62 billion owed, leaves about $1.03 billion, or $3.38 per share. Bull case. The plants that are already built keep filling: revenue reaches $1.85 billion in fiscal 2027 and about $2.0 billion for fiscal 2028-2031, supported by the backlog and by fiscal 2026 order intake of roughly $3.6 billion, at fiscal 2026's 14.1% margin, then eases back to the fiscal 2026 level of $1.42 billion and about $192 million a year of cash earnings, held indefinitely. Business value about $3.57 billion, less $0.56 billion owed, leaves about $3.0 billion, or $9.86 per share. Further growth from market expansion, new plants or acquisitions is not credited because none is contracted or yet demonstrated through a downturn. What would make this wrong. On the upside, the June 2026 quarter's operating income ($92 million, about 20% of sales versus 13% for the year) persisting for two or three more quarters would show a higher normal level than we use, and lower true upkeep spending would add to every case. On the downside, the company is three years old as a combined business, has never been through an industry downturn, and is controlled by a private-equity seller that has been reducing its stake; a sharp pullback in AI data-center construction would hit it harder than diversified peers. All figures are from the fiscal 2026 annual report and the March 2026 quarterly report; values are discounted at 6%.