KNF
Knife River Corporation
$53.12
Cyclical & Capital-Intensive
70%
Normalized Earnings × Cycle Multiple
Mild
·
Conviction
Overvalued
Trading 6.9% above fair value
You pay
$53.12
Bear
$38.64
Fair
$49.68
Bull
$60.72
Bear
$38.64
-27.3%
$2.76 × 14x
Fair
$49.68
-6.5%
$2.76 × 18x
Bull
$60.72
+14.3%
$2.76 × 22x
Adjust Assumptions
18.0x
2.76$
Key Value Driver
Through-cycle normalized EPS ($2.76)
Implied Market Multiple
19.2x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (8 analysts)
$71.40
Divergence from AlphaVal
30%
Summary
Using 6-year normalized EPS of $2.76 at a 18x cycle multiple, the base-case value is $49.68 per share. P/TBV cross-check: 2.8x.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Price-to-book value of 2.8x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
Wall Street's average price target is $71.40 (from 8 analysts). Our estimate is 30% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing