KAISER ALUMINUM CORP (KALU): what the price assumes

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/KALU

Headline

Field	Value
Ticker	KALU
Company	KAISER ALUMINUM CORP
Current price	$152.66/sh
Composition	Aero/HS Products 25% / Packaging 44% / GE Products 23% / Automotive Extrusions 8%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin (value-band context)	2.8%
Operating margin today	6.6%
Margin compression (value-band)	-3.8pp
Implied growth	10.0%
Multiple paid	14x operating income

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.9% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6pp.

How unusual the bet is: within-range (limited comparison data)

Reference	Value
vs own history	+0.09σ
implied end-window share	0%

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; earnings-power land below the price.

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	1.45x	5	expensive
Earnings	1.54x	3	expensive
Relative	1.11x	5	expensive
Growth	0.89x	3	justifies

Families that justify the price: Relative, Growth Families that call it expensive: Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.8%); the inversion above states its own rate.

Per-Model Detail (n=16)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$16.62	9.19x	yes	FCF base $0.0B, growth 21% (input: historical growth), terminal g 4.0%, WACC 6.8%, 5yr projection
DCF Exit Multiple	Growth	$179.93	0.85x	yes	Exit EV/EBITDA: 4.6x / 9.6x / 14.6x (bear / base = today's held flat / bull), 5yr
Relative Valuation	Relative	$137.29	1.11x	yes	P/E 14x (static sector reference · 2026-04), scenarios: 10.5x / 14.0x / 16.8x (bear / base = reference held flat / bull), EV/EBITDA 8x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$101.49	1.50x	yes	BV/sh $53.69, ROE (TTM) 17.5%, ke 9.3%
Two-Stage Excess Return	Asset	$137.73	1.11x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$171.84	0.89x	yes	Rev $3.7B, growth 21% (input: historical growth; tapered), Terminal P/S: 0.5x / 0.7x / 0.8x (bear / base = today's held flat / bull, cap 6x)
Peter Lynch Fair Value	Relative	$110.04	1.39x	yes	EPS $9.17, growth 1% (input: historical EPS growth), PEG=11.13 (Overvalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$17.58	8.68x	yes	Normalized EBIT (5y avg op income, one-time charges added back) $0.12B × (1−24%) / WACC 6.8% → EPV (no growth)
Residual Income	Asset	$137.76	1.11x	yes	BV $53.69 + 5yr PV of (ROE (TTM) 17.5% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham Number	Asset	$105.25	1.45x	yes	√(22.5 × EPS $9.17 × BVPS $53.69) — Graham's conservative floor
EV/EBITDA Relative	Relative	$116.80	1.31x	yes	EBITDA $0.37B × sector EV/EBITDA 8.0x
FCF Yield	Earnings	$0.01	15265.50x	yes	FCF $24.2M / Kₑ 9.3% — zero-growth perpetuity (excluded from median)
SBC-Adj FCF Yield	Earnings	$0.01	15265.50x	yes	SBC-adj FCF $0.00B (FCF $0.02B − SBC $0.02B) capitalized at Kₑ (excluded from median)
Ben Graham Formula	Earnings	$295.89	0.52x	yes	EPS $9.17 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	$30.67	4.98x	yes	BV $53.69 × (ROIC 3.9% / WACC 6.8%)
P/Sales Sector	Relative	$339.86	0.45x	yes	Revenue $3.70B × sector P/S 1.5x
PEG Fair Value	Relative	$343.88	0.44x	yes	EPS $9.17 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings Yield	Earnings	$99.14	1.54x	yes	EPS $9.17 / 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	$1.0b
Net debt / NOPAT (after-tax)	5.50x
Net debt / operating income (pre-tax)	4.17x
Interest coverage	4.6x
Share count CAGR (dilution)	1.2%
Burning cash	no

Bullet Takeaways

• Kaiser Aluminum does not bet on the price of aluminum; it earns a conversion fee for turning metal into engineered products for aerospace, packaging, and automotive markets, passing the metal cost through and getting paid for the fabrication, which is why conversion revenue, not net sales, is the number that matters.
• The defining risk is cyclicality concentrated in aerospace, where the company says demand is "heavily impacted by commercial airframe build rates", layered on a balance sheet carrying meaningful debt at roughly 2.8 times net leverage.
• Watch the conversion-revenue and margin trajectory after a record first quarter, with adjusted EBITDA up 74% and management raising full-year guidance to 10% to 15% conversion-revenue growth and 20% to 30% EBITDA growth.

Bull Case

The standard valuation models miss what Kaiser actually is, and that gap is the bull case. On the surface it looks like a commodity aluminum producer whose fortunes ride the metal price. It is not. Kaiser is a converter: it buys aluminum, hedges the metal cost, fabricates it into specialized products, and gets paid a conversion margin for the engineering. The 10-K lays this out explicitly in its own reporting, breaking net sales down to conversion revenue by stripping out the "Hedged Cost of Alloyed Metal", so that Packaging, Aero/HS Products, and Automotive Extrusions each report a conversion figure that is the real economic revenue. A model that values Kaiser on net sales or on a commodity-producer multiple is pricing the wrong business; the right lens is the conversion margin, which is far more stable than the aluminum price.

That conversion model produces margins a commodity company could never sustain. In the first quarter, on $1.1 billion of net sales, conversion revenue was $404 million and adjusted EBITDA was $129 million, a 31.8% adjusted EBITDA margin on conversion revenue, up 1,200 basis points year over year. The reason the margin can expand that much is operating leverage: the conversion business has high fixed costs in its rolling mills, so when volumes and mix improve, the incremental conversion revenue drops to EBITDA at a high rate. The first quarter was a record, with adjusted EBITDA up 74%.

The demand backdrop behind that record is durable, not a one-off. The Aero/HS franchise is tied to commercial aerospace, where airframe build rates have a long, visible recovery runway as manufacturers work through backlogs, and packaging provides a steadier, less cyclical base. Management raised full-year guidance to 10% to 15% conversion-revenue growth and 20% to 30% EBITDA growth, citing strong demand, improved mix, and operational execution. A business getting paid for engineering rather than for metal, with high operating leverage into an aerospace recovery, is one the static frames will keep undervaluing precisely because they read it as a commodity name.

Bear Case

The most honest read of this stock comes from where the valuation methods disagree, and the disagreement is stark. Only the forward-growth method reaches today's price; the asset-value, earnings-power, and peer-multiple methods all read it as richly valued, with the asset lens at roughly 1.8 times what book-and-profitability frames justify and the zero-growth earnings lens well below the price. When the conservative methods, the ones that value a business on what it earns today rather than what it might earn after years of growth, all land below the price, the more skeptical interpretation is usually the more honest one: the market is paying for a peak to persist.

And this looks like a peak. The first quarter was a record, with EBITDA margin up 1,200 basis points year over year, the kind of jump that comes from a favorable point in the cycle as much as from structural improvement. Kaiser's largest end market is heavily exposed to one variable it does not control: the 10-K states demand for its Aero/HS products is "heavily impacted by commercial airframe build rates", and to a lesser degree business jets, space, and defense. Airframe build rates can stall on a single manufacturer's production problems, a demand air pocket, or a supply-chain disruption, and when they do, Kaiser's highest-margin conversion volumes fall first. The same operating leverage that magnifies the upside magnifies the downside.

The balance sheet removes the margin for error. Net debt of about $1.0 billion sits at roughly 4 times trailing operating income, with interest coverage near 4.6 times, leverage that is manageable at a cyclical high but tightens fast if conversion volumes retreat. The company also flags competitive and trade exposure, warning that tariffs meant to protect US manufacturers "may not be fully effective or could disrupt supply chains or otherwise increase our costs". Pay a premium that only the growth method supports, at a cyclical peak, with this much leverage and a single dominant end market, and the bet is that the aerospace cycle keeps climbing long enough to grow into the price. The static methods are quietly betting it does not.

Valuation

Read this price through conversion revenue, not net sales, because the metal cost is passed through and only the conversion margin is real economics. The market is paying roughly 18 times company-wide operating income, and only the forward-growth method reaches that price; the asset-value, earnings-power, and peer-multiple families all read it as expensive. That is the classic moat-or-cyclical-peak ambiguity: the static methods cannot tell the difference between a business that will durably compound and one sitting at the top of its cycle, because both look rich on today's numbers.

The pattern of disagreement is the information. The asset lens sits at about 1.8 times what book-and-profitability methods justify, the earnings-power lens well below the price, and only the growth-DCF, which credits future expansion, bridges the gap. The implied bet is operating growth near 20% a year, sustained, against a current operating margin around 6.6% on net sales (much higher on conversion revenue). For a converter levered to aerospace, the durability of that growth is the entire question. A reader should treat the cheap-looking growth method and the expensive-looking static methods as two honest answers to two different questions: what the price needs if the cycle persists, versus what the business is worth on today's earnings if it does not.

Solvency is the constraint that turns a cyclical bet into a sharper one. Net debt of roughly $1.0 billion at about 4 times operating income, with interest coverage near 4.6 times, is comfortable at a cyclical high and uncomfortable at a cyclical low. The conversion model gives Kaiser more earnings stability than a pure producer, which supports carrying this leverage, but the combination of debt, operating leverage, and aerospace concentration means the downside is steeper than the headline margins suggest. The price is reasonable if the aerospace recovery is durable; the methods that say it is expensive are pricing the risk that it is not.

Catalysts

The first quarter was a record across the key metrics. Kaiser reported net sales of $1.1 billion and conversion revenue of $404 million, with net income of $63 million, or $3.71 per diluted share, and adjusted EPS of $3.74 that beat the $1.93 consensus by a wide margin. Adjusted EBITDA was $129 million at a 31.8% margin on conversion revenue, up 74% year over year with the margin rising 1,200 basis points, and the stock rose on the print.

Management raised full-year guidance, now expecting conversion revenue to grow 10% to 15% and EBITDA to increase 20% to 30% year over year on strong demand, improved mix, and operational execution. The net debt leverage ratio improved to 2.8 times and the company declared a $0.77 quarterly dividend. The signals to track are commercial aerospace build rates, the single biggest swing factor on the high-margin Aero/HS volumes, the trajectory of the packaging business as a steadier base, and whether the leverage ratio keeps improving as EBITDA grows into the debt.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• CSTM (CONSTELLIUM SE)
• FY2025 10-K: …markets in regions with abundant natural resources, low-cost labor and energy, and lower environmental and other standards may pose a significant competitive threat to our business. Moreover, technological innovation is important to our customers who require us to lead or keep pace with new innovations to address…
• FY2025 10-K: …ability to maintain or raise prices in the future may be limited, including during periods of raw material and other cost increases. If we are forced to reduce or maintain prices or reduce volumes of production during periods of increased costs, or if we lose customers because of consolidation, pricing or other…
• AA (Alcoa Corp)
• FY2025 10-K: …is dependent upon the type of product we are selling. The market for primary aluminum is global, and demand for aluminum varies widely from region to region. We compete with commodity traders, such as Glencore, Trafigura, Vitol, Mercuria and Gunvor, and aluminum producers, such as Emirates Global Aluminum, Norsk…
• FY2025 10-K: …position depends, in part, on our ability to operate as an integrated aluminum value chain, leverage innovation expertise across businesses and key end markets, and access an economical power supply to sustain our operations in various countries. See Part I Item 1 of this Form 10-K under caption Competition. We may…
• CENX (Century Aluminum Company)
• FY2025 10-K: …withstand reductions in price or other adverse industry or economic conditions. Competitive Advantages While we face significant competition, we also have several competitive advantages. We believe our key competitive advantages are: Focus on Primary Aluminum Business. We operate principally in the production of…
• FY2025 10-K: …production capacities as compared to the year ended December 31, 2024. Our net sales are impacted primarily by the LME price for aluminum, regional and value-added premiums, and the volume and product mix of aluminum we ship during the period. In general, our results reflect the LME and regional premium pricing on an…
• HWM (HOWMET AEROSPACE INC.)
• FY2025 10-K: …360 basis points in 2024 compared with 2023, primarily due to growth in the commercial aerospace, defense aerospace, and gas turbines markets. 25 Table of Contents In 2026, as compared to 2025, demand in the commercial aerospace, defense aerospace, and gas turbines markets is expected to increase, including engine…
• FY2025 10-K: …are excluded from net margin and Segment Adjusted EBITDA. The Company's CODM considers forecast-to-actual variances for Segment Adjusted EBITDA when allocating resources across the Company's reportable segments. Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Differences…
• MLI (MUELLER INDUSTRIES INC)
• FY2025 10-K: …Great Britain, South Korea, and the Middle East. Additionally, products are sold and marketed through a complement of agents, which, when combined with our sales organization, provide the Company broad geographic market representation. The total amount of order backlog for the Piping Systems segment as of December…
• FY2025 10-K: …of $10.0 million, (ii) higher foreign currency transaction losses of $9.3 million, (iii) higher employment costs of $4.5 million, (iv) incremental expenses of $3.0 million associated with the acquisition of Elkhart, and (v) higher sales and marketing expense of $2.1 million. During 2025, the segment recognized net…
• STLD (Steel Dynamics, Inc.)
• FY2025 10-K: …We compete in numerous industry sections, most significantly tied to the construction, automotive, and other manufacturing sectors. In many applications within these industry sections, steel competes with other materials, such as aluminum, cement, composites, plastics, carbon fiber, glass, and wood. Some of our…
• FY2025 10-K: …75% controlling equity interest in SDI Biocarbon Solutions, LLC. Steel operations accounted for 72% and 69% of our consolidated net sales during 2025 and 2024, respectively. See Item 1. Business for further information on Steel Operations segment operations. Steel Operations Segment Shipments (tons): ​ ​ ​ ​ ​ ​ ​ ​…
• CMC (COMMERCIAL METALS COMPANY)
• FY2025 10-K: …This is a strategic advantage when imports increase as our steel mills can continue to supply our fabricators. Contract pricing that is utilized for these operations helps to stabilize short-term volatility. The construction-related solutions and value-added products within our Emerging Businesses Group segment…
• FY2025 10-K: …and meeting our business goals and objectives, and we depend on a qualified labor force for the manufacture of our products. The impact of labor shortages and increased competition for available workers may increase our costs or impede our ability to optimally staff our facilities and could have an adverse impact on…
• CRS (CARPENTER TECHNOLOGY CORPORATION)
• FY2025 10-K: …Products. The SAO segment is comprised of the Company's major premium alloy and stainless steel manufacturing operations. This includes operations performed at mills primarily in Reading and Latrobe, Pennsylvania and surrounding areas as well as South Carolina and Alabama. The combined assets of the SAO operations…
• FY2025 10-K: …statements. See Note 18 to the consolidated financial statements in Item 8. "Financial Statements and Supplementary Data" for a full reconciliation of the statutory federal tax rate to the effective tax rates. Business Segment Results Summary information about our operating results on a segment basis is set forth…

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