KNF
Knife River Corporation
$72.20
Cyclical & Capital-Intensive
70%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 36.0% above fair value
You pay
$72.20
Bear
$38.92
Fair
$53.07
Bull
$67.22
Bear
$38.92
-46.1%
$2.76 × 14x + net cash
Fair
$53.07
-26.5%
$2.76 × 18x + net cash
Bull
$67.22
-6.9%
$2.76 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($2.76)
Implied Market Multiple
26.2x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $99.75 from 7 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $53.07 per share.
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 3.8x 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 $99.75 (from 7 analysts). Our estimate is 58% 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