Kadant Inc (NYSE: KAI)

Sector: Industrials Industry: Specialty Industrial Machinery CIK: 0000886346
Market Cap 4.82 Bn
P/B 24.98
P/E 8,337.75
P/S 21.73
ROIC (Qtr) 9.10
Div Yield % 0.10
Rev 1y % (Qtr) -0.02
Total Debt (Qtr) 258.01 Mn
Debt/Equity (Qtr) 0.27
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About

Kadant Inc. (KAI), a prominent player in the industrial processing sector, is a global supplier of technologies and engineered systems that facilitate Sustainable Industrial Processing. The company operates in three main segments: Flow Control, Industrial Processing, and Material Handling. Kadant Inc.'s primary business activities revolve around the development, manufacturing, and servicing of a wide range of products and equipment used in process industries such as paper, packaging, and tissue; wood products; mining; metals; food processing; and...

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Investment thesis

Bull case

  • Strong operating cash flow of 162.46M provides robust 0.63x coverage of total debt 258M, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 126.91M provide 37.48x coverage of short-term debt 3.39M, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 162.46M provides exceptional 123.83x coverage of minority interest expenses 1.31M, showing strong core operations.
  • Operating cash flow of 162.46M provides exceptional 10.91x coverage of interest expenses 14.89M, showing strong debt service capability.
  • Operating cash flow of 162.46M provides strong 14.47x coverage of stock compensation 11.23M, indicating sustainable incentive practices.

Bear case

  • Operating cash flow of 162.46M barely covers its investment activities of (29.49M), with a coverage ratio of -5.51, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 162.46M provides thin coverage of dividend payments of (15.53M) with a -10.46 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Investment activities of (29.49M) provide weak support for R&D spending of 14.86M, which is -1.98x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Cash reserves of 126.91M provide limited coverage of acquisition spending of (14.79M), which is -8.58x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Free cash flow of 145.99M represents just -1.93x of debt issuance (75.81M), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Segments Breakdown of Revenue (2024)

Product and Service Breakdown of Revenue (2024)

Peer comparison

Companies in the Specialty Industrial Machinery
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 GEV GE Vernova Inc. 224.93 Bn 194.57 6.14 0.00 Bn
2 ETN Eaton Corp plc 153.13 Bn 38.99 5.75 11.22 Bn
3 PH Parker-Hannifin Corp 135.87 Bn 165.29 12.09 9.87 Bn
4 EMR Emerson Electric Co 111.68 Bn 47.10 4.65 13.41 Bn
5 ITW Illinois Tool Works Inc 86.68 Bn 28.27 5.40 8.97 Bn
6 CMI Cummins Inc 82.13 Bn 28.89 2.44 7.55 Bn
7 AME Ametek Inc/ 53.79 Bn 36.34 7.27 2.28 Bn
8 ROK Rockwell Automation, Inc 43.80 Bn 44.24 5.11 3.68 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 3.13 2.28
EV to Cash from Ops. EV/CFO 166.53 37.14
EV to Debt EV to Debt 18.59 34.39
EV to EBIT EV/EBIT 1,131.85 27.71
EV to EBITDA EV/EBITDA 425.93 25.34
EV to Free Cash Flow [EV/FCF] EV/FCF 175.21 133.36
EV to Market Cap EV to Market Cap 1.00 1.04
EV to Revenue EV/Rev 21.63 39.88
Price to Book Value [P/B] P/B 24.98 6.22
Price to Earnings [P/E] P/E 8,337.75 143.63
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 6.57 2.57
Dividend Payout Ratio % Div Payout % (Qtr) 15.20 15.73
Dividend per Basic Share Div per Share (Qtr) 1.34 0.91
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 10.81 82.53
Interest Coverage Int. cover (Qtr) 10.41 12.34
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 27.66 -45.99
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 41.43 118.48
Dividend Growth (1y) % Div 1y % (Qtr) 7.20 10.01
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -11.47 -283.03
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -6.48 -36.87
EBIT Growth (1y) % EBIT 1y % (Qtr) -11.07 -80.72
EBT Growth (1y) % EBT 1y % (Qtr) -10.89 -120.93
EPS Growth (1y) % EPS 1y % (Qtr) -11.53 -39.22
FCF Growth (1y) % FCF 1y % (Qtr) 4.39 85.55
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 1.23 0.87
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.67 0.62
Cash Payout Ratio Cash Payout (Qtr) 0.09 0.10
Cash Ratio Cash Ratio (Qtr) 0.60 3.01
Current Ratio Curr Ratio (Qtr) 2.45 4.97
Debt to Equity Ratio Debt/Equity (Qtr) 0.27 0.38
Interest Cover Ratio Int Coverage (Qtr) 10.41 12.34
Times Interest Earned Times Interest Earned (Qtr) 10.41 12.34
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 20.00 -7,291.27
EBIT Margin % EBIT Margin % (Qtr) 15.13 -7,413.30
EBT Margin % EBT Margin % (Qtr) 13.68 -9,015.79
Gross Margin % Gross Margin % (Qtr) 45.10 -32.61
Net Profit Margin % Net Margin % (Qtr) 10.00 -7,962.06