KADANT INC (KAI): what the price requires
At today's price, KADANT INC (KAI) is priced for today's economics sustained for ~5.5 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/KAI
Headline
| Field | Value |
|---|---|
| Ticker | KAI |
| Company | KADANT INC |
| Current price | $289.92/sh |
| Composition | Parts and Consumables 71% / Capital 29% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 8.3% |
| Operating margin today | 15.1% |
| Margin compression implied | -6.8pp |
| Must persist for | 5.5y |
| Multiple paid | 24x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 10% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.7 years.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| vs own history | +0.47σ |
| cohort percentile (of 225 peers) | 55 |
| sustained it ~5.5 years at this level | 28% |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 2.89x | 5 | expensive |
| Earnings | 2.30x | 4 | expensive |
| Relative | 1.27x | 3 | expensive |
| Growth | 1.06x | 3 | expensive |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.
Per-Model Detail (n=15)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $272.92 | 1.06x | yes | FCF base $0.2B, growth 5% (input: historical growth), terminal g 4.0%, WACC 9.2%, 6yr projection |
| DCF Exit Multiple | Growth | $283.69 | 1.02x | yes | Exit EV/EBITDA: 13.3x / 15.3x / 17.3x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $218.44 | 1.33x | yes | P/E 22.53x (blended: static sector reference 18x + trailing (TTM) 33x), scenarios: 18.8x / 22.5x / 26.2x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $94.73 | 3.06x | yes | BV/sh $84.36, ROE (TTM) 10.4%, ke 9.3% |
| Two-Stage Excess Return | Asset | $100.20 | 2.89x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $223.75 | 1.30x | yes | Rev $1.1B, growth 5% (input: historical growth; tapered), Terminal P/S: 2.6x / 3.1x / 3.6x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $114.94 | 2.52x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.16B × (1−28%) / WACC 9.2% → EPV (no growth) |
| Residual Income | Asset | $101.21 | 2.86x | yes | BV $84.36 + 5yr PV of (ROE (TTM) 10.4% − Kₑ 9.3%) × BV; BV grows 6.8%/yr |
| Graham Number | Asset | $129.02 | 2.25x | yes | √(22.5 × EPS $8.77 × BVPS $84.36) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $228.93 | 1.27x | yes | EBITDA $0.22B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $150.66 | 1.92x | yes | FCF $153.9M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $140.21 | 2.07x | yes | SBC-adj FCF $0.14B (FCF $0.15B − SBC $0.01B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $7.35 | 39.44x | yes | EPS $8.77 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $29.80 | 9.73x | yes | BV $84.36 × (ROIC 3.3% / WACC 9.2%) |
| P/Sales Sector | Relative | $231.86 | 1.25x | yes | Revenue $1.09B × sector P/S 2.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $94.81 | 3.06x | yes | EPS $8.77 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $260.6m |
| Net debt / NOPAT (after-tax) | 2.30x |
| Net debt / operating income (pre-tax) | 1.65x |
| Interest coverage | 10.7x |
| Share count CAGR (dilution) | 0.3% |
| Burning cash | no |
Bullet Takeaways
- Kadant builds industrial process equipment and, more importantly, the parts and consumables that keep that equipment running, a razor-and-blade model where the recurring aftermarket revenue grew 11% in 2025 even as the lumpier capital-equipment side swung with customer spending.
- The defining risk is the cyclicality of those capital projects, which the company says "tend to be variable and hard to predict", paired with a balance sheet now carrying acquisition-related debt after the recent Kadant Profil deal.
- Watch the backlog and bookings, which hit a record $320.8 million in the first quarter, against full-year EPS guidance that management lowered for purchase-accounting dilution even as it raised revenue guidance.
Bull Case
The moat is the installed base, and the margins prove it. Kadant sells highly engineered equipment into industrial processing, and once that equipment is running in a customer's plant, the company sells the parts and consumables that keep it running for years. That aftermarket stream is the durable, high-margin core: the 10-K reports demand for parts and consumables "remained strong, with an 11% increase in 2025", growth that does not depend on customers approving new capital budgets. A trailing operating margin near 14.8% and interest coverage of ten times reflect a business where the recurring revenue carries the fixed costs and the capital orders are upside on top.
The capital side also has a structural defense against losing a sale once it is signed. The 10-K explains that large capital projects are "highly customized for the customer and, as a result, would include a significant cost to rework in the event of cancellation", which means orders in backlog are sticky and the customer is locked into Kadant's engineering rather than free to switch mid-project. That customization is the second layer of the moat: not just the installed base pulling aftermarket demand, but each new project deepening the switching cost for the equipment that follows.
The current cycle is turning Kadant's way. First-quarter revenue rose 17.7% to $281.5 million, and bookings hit a record $320.8 million, up 25.2%, lifting backlog to $326 million, with organic bookings up 23%. Adjusted EPS of $2.84 beat the $2.14 estimate by a wide margin, and adjusted EBITDA margin reached 20.2%. Management raised full-year revenue guidance to $1.178 to $1.203 billion. A company with a record book of business, a recurring aftermarket base growing through any cycle, and the engineering lock-in to defend its capital orders is the kind of compounder the static valuation methods struggle to credit.
Bear Case
The balance sheet has changed shape, and that is the place to start. Kadant carries net debt of about $261 million, roughly 1.6 times trailing operating income, after funding the €157 million Kadant Profil acquisition. Interest coverage of ten times is still healthy, but the company has moved from a near-net-cash posture to one where it is integrating an acquisition and servicing more debt at the same time. The immediate cost is visible: management lowered its full-year EPS guidance even while raising revenue guidance, because the Profil deal is dilutive to adjusted EPS by $0.20 in 2026 as purchase accounting defers income. Acquisitions are how Kadant grows, but each one adds integration risk and leverage, and the market is paying a premium that assumes those deals keep compounding value rather than diluting it.
The deeper fragility is the capital-equipment cycle the company cannot control. Kadant tells investors plainly that its "bookings and revenues for capital projects tend to be variable and hard to predict" and that it is "especially difficult to accurately forecast our operating results during periods of economic uncertainty" when customers curtail capital and operating spending. The record first-quarter bookings are the cycle near a peak; the same line item can fall sharply when industrial customers pause expansion. The aftermarket base cushions a downturn, but it does not eliminate the swing, and a stock priced for durable compounding is most exposed at exactly the moment the capital cycle rolls over.
That exposure is sharpened by what the price asks. At roughly 25 times company-wide operating income, only the growth-DCF method reaches the price; the asset-value, earnings-power, and peer-multiple methods all read it as richly valued, with the asset lens at three times what book-and-profitability frames justify and the zero-growth earnings lens at well under half the price. That pattern means the entire premium rests on Kadant sustaining above-average compounding for years. Pay it near a bookings peak, with fresh acquisition debt and a guidance cut already in hand, and the bet is that the cycle and the integration both cooperate.
Valuation
The price is a durability bet, and the methods say so cleanly. At about 25 times company-wide operating income, only the forward-growth method reaches the price; the asset-value, earnings-power, and peer-multiple families all land below it. That is the signature of a moat-and-compounding premium: the static methods, which value the business on today's earnings or book value, structurally cannot price the recurring aftermarket annuity and the engineering lock-in that let Kadant grow steadily, so the price looks rich on every frame except the one that credits future growth. The trailing operating margin near 14.8% is the base; the premium is the market paying for that base to expand through continued aftermarket growth and bolt-on acquisitions.
The spread between the methods is the information. The asset-value lens reads the price at roughly three times what book-and-profitability methods justify, and the zero-growth earnings lens lands well under half the price. A reader should take from that pattern not that the stock is mispriced, but that the price is entirely a wager on durable compounding, the kind of bet that pays off for genuinely advantaged industrials and punishes hard when the compounding stalls. The implied runway is roughly six years of sustained above-average growth, which is demanding for a business with a cyclical capital-equipment leg.
Solvency is sound but no longer pristine. Net debt around $261 million at 1.6 times operating income with ten-times interest coverage is comfortable, but the recent acquisition has added leverage and near-term EPS dilution, so the balance sheet now carries integration risk alongside the cycle risk. The genuine question the price raises is durability: whether the aftermarket base and the acquisition pipeline can keep compounding through the next capital-spending downturn at a pace that earns a multiple this far above the static methods.
Catalysts
The first quarter was a record on the order side. Kadant posted revenue of $281.5 million, up 17.7%, and bookings of $320.8 million, up 25.2%, a record that lifted backlog to $326 million, with organic bookings up 23% on strong aftermarket parts demand and improving capital-project activity. Adjusted EPS of $2.84 beat the $2.14 consensus by roughly a third, and adjusted EBITDA margin reached 20.2%.
The forward picture carries one important wrinkle. Management raised full-year revenue guidance to $1.178 to $1.203 billion but lowered its GAAP and adjusted EPS ranges, citing short-term dilution from the recently completed €157 million Kadant Profil acquisition, which it expects to reduce 2026 adjusted EPS by $0.20 as purchase accounting defers income. For the second quarter Kadant guided revenue of $296 to $306 million and adjusted EPS of $2.88 to $2.98. The signals to track are whether the record backlog converts to revenue on schedule, whether the Profil integration moves from dilutive to accretive, and whether bookings hold as industrial customers set capital budgets for the back half of the year.
Peer Cohorts (Per Segment, With Filing Citations)
Flow Control (reported)
- ROK (Rockwell Automation, Inc.)
- (no filing in the citation store)
- PH (PARKER-HANNIFIN CORPORATION)
- (no filing in the citation store)
- FLS (FLOWSERVE CORP)
- (no filing in the citation store)
- XYL (Xylem Inc.)
- (no filing in the citation store)
- IEX (IDEX CORP)
- (no filing in the citation store)
- EMR (EMERSON ELECTRIC CO.)
- (no filing in the citation store)
- AME (AMETEK, Inc.)
- (no filing in the citation store)
- DOV (DOVER Corp)
- (no filing in the citation store)
Industrial Processing (reported)
- NDSN (NORDSON CORPORATION)
- (no filing in the citation store)
- DOV (DOVER Corp)
- (no filing in the citation store)
- IEX (IDEX CORP)
- (no filing in the citation store)
- MIDD (THE MIDDLEBY CORPORATION)
- (no filing in the citation store)
- GGG (GRACO INC.)
- (no filing in the citation store)
Material Handling (reported)
- CECO (CECO ENVIRONMENTAL CORP.)
- (no filing in the citation store)
- MWA (MUELLER WATER PRODUCTS, INC.)
- (no filing in the citation store)
- GTLS (CHART INDUSTRIES, INC.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Q1 2026 earnings release · Q1 2026 guidance · Q2 2026 guidance