KNF
Knife River Corporation
$61.43
Cyclical & Capital-Intensive
70%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 23.7% above fair value
You pay
$61.43
Bear
$38.64
Fair
$49.68
Bull
$60.72
Bear
$38.64
-37.1%
$2.76 × 14x
Fair
$49.68
-19.1%
$2.76 × 18x
Bull
$60.72
-1.2%
$2.76 × 22x
Adjust Assumptions
18.0x
2.76$
Key Value Driver
Through-cycle normalized EPS ($2.76)
Implied Market Multiple
22.3x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (7 analysts)
$85.25
Divergence from AlphaVal
42%
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: 3.2x.
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 3.2x 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 $85.25 (from 7 analysts). Our estimate is 42% 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