Kennametal Jumps 20.9% on Industry Momentum, But Is the Stock Priced Right for 2025?

• Ever wondered whether Kennametal is undervalued or if it is already priced for perfection? If you care about getting the most for your investment dollar, the answer might surprise you.
• Kennametal has recently caught some attention, rising over 20.9% in the last month alone. It is now up 16.7% year-to-date, which could signal shifting sentiment and fresh opportunity.
• Much of this momentum follows a flurry of positive industry commentary and renewed demand signals from the manufacturing sector, with analysts noting increased investment in infrastructure and machinery. These sector-wide tailwinds have helped propel Kennametal's shares after a period of lackluster performance.
• When it comes to valuation, Kennametal has a score of 4 out of 6 on our checks. This means it currently looks undervalued on four key measures. Next, we’ll dig into these valuation methods and what they reveal, but stick around until the end for an even smarter way to gauge the real value behind the numbers.

Find out why Kennametal's -0.0% return over the last year is lagging behind its peers.

Approach 1: Kennametal Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and then discounting them back to the present using an appropriate rate. This approach offers a detailed look at Kennametal’s underlying financial potential, focusing on how much cash the business is expected to generate in years to come.

For Kennametal, the current Free Cash Flow stands at $87.5 million. Analysts have provided cash flow projections for the next five years, which are then extrapolated further by Simply Wall St’s models. Notably, free cash flow is projected to rise steadily, reaching $258 million by 2028. Over the full ten-year timeline, estimates increase to more than $511 million by 2035, illustrating anticipated robust growth.

After discounting all these future cash flows back to today’s value using a two-stage Free Cash Flow to Equity approach, the DCF model calculates Kennametal’s intrinsic value at $75.78 per share. Compared with its current share price, this represents a significant discount of 63.5% undervalued. This suggests Kennametal’s shares are trading well below what its future cash-generating ability would warrant.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Kennametal is undervalued by 63.5%. Track this in your watchlist or portfolio, or discover 919 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Kennametal.

Approach 2: Kennametal Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used indicator for valuing profitable companies like Kennametal, as it captures the relationship between a company's current share price and its earnings per share. For businesses with stable or growing profits, the PE ratio helps investors quickly gauge how much the market is willing to pay for each dollar of earnings.

Growth expectations and risk play a central role in what investors consider a "normal" or "fair" PE ratio. Companies with better growth prospects, strong balance sheets, and lower risk profiles tend to command higher PE multiples. Conversely, those facing headwinds or uncertainties usually trade at a discount.

Kennametal’s current PE ratio stands at 22.34x, which is just below the machinery industry average of 24.88x and is meaningfully lower than the peer average of 43.21x. While these broad comparisons provide useful context, they do not capture company-specific fundamentals. This is where Simply Wall St’s proprietary “Fair Ratio” comes into play. The Fair Ratio for Kennametal is 21.20x, a value tailored to its actual growth outlook, risk profile, margin structure, and market capitalization.

Unlike simple peer or industry benchmarks, the Fair Ratio reflects what investors should expect for Kennametal’s unique characteristics by combining both financial performance and the broader market environment. Comparing the current PE ratio to this Fair Ratio, Kennametal’s shares are trading almost exactly in line with what our models determine is fair value.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1439 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Kennametal Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple, dynamic story investors create to explain their unique take on a company's future by linking their views about Kennametal’s business, strategy, and industry trends to specific forecasts of revenue, earnings, and profit margins. These forecasts are then used to estimate fair value.

Rather than relying only on conventional ratios or analyst targets, Narratives help you connect the company’s real story, such as new innovations, market growth, or cost hurdles, to numbers that drive investment decisions. On Simply Wall St’s Community page, Narratives make this accessible to everyone. Used by millions, it lets you compare your view of fair value with the current market price and see what other investors think, helping you decide if it’s the right time to buy, hold, or sell.

Narratives update automatically whenever there is new news, earnings, or developments, so your perspective never falls out of date. For example, some investors see Kennametal as an up-and-coming winner with a fair value estimate of $25.25 per share and room for further growth, while others remain cautious, sticking to the consensus price target of $21.06 and seeing the stock as fairly priced.

Do you think there's more to the story for Kennametal? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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