Is Knife River’s Share Slide Justified After $500 Million Infrastructure Contract Win?

If you're standing at the crossroads of what to do with your Knife River shares or thinking of putting some capital to work, you're not alone. Knife River’s recent performance has grabbed the attention of both cautious investors and opportunists, sparking plenty of debate on whether the current price fairly reflects the company’s long-term prospects.

Knife River's stock price has seen a difficult stretch lately. Down 3.9% in the last week, 11.6% in the last month, and a hefty 29.2% year-to-date, the stock certainly hasn't been immune to shifting market sentiment. Over the past year, shares are lower by 19.1%. This downward trend comes after a period of broader industry volatility and changing investor appetite for industrial infrastructure companies. Shifts in project pipelines and ongoing debates about U.S. infrastructure investments have played a role in recent price action, leading some to question whether risk perceptions have outpaced the company’s actual fundamentals.

But is the market overreacting? When we drill into the numbers, Knife River earns a valuation score of 3 out of 6, meaning it checks the “undervalued” box on half of our key criteria. That’s a positive sign and suggests investors should take a closer look before making any snap judgments.

Let's dive into the major valuation approaches and see how Knife River measures up. At the end, I’ll show you an even more practical lens for valuing this company going forward.

Why Knife River is lagging behind its peers

Approach 1: Knife River Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to their present value. This essentially provides an estimate of what the business is worth today based on its ability to generate cash in the future.

Knife River's most recent trailing twelve month Free Cash Flow sits at $26.2 Million. Analysts forecast robust growth, projecting Free Cash Flow to hit $257.4 Million by 2027, with further increases each year. By 2035, Simply Wall St extrapolations suggest FCF may reach approximately $403 Million. These projections shine a spotlight on the company's growth potential, though it is worth remembering that projections beyond five years become increasingly speculative.

According to the DCF calculation using the 2 Stage Free Cash Flow to Equity model, the fair value for Knife River is $98.50 per share. Compared to recent market prices, this implies the stock is 27.9% undervalued by this methodology, offering a notable margin of safety for value-focused investors.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Knife River is undervalued by 27.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Knife River Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a popular valuation measure for companies like Knife River that are generating consistent profits. It allows investors to compare the price they pay for each dollar of earnings, which is especially helpful when assessing mature, profitable businesses.

What counts as a “normal” or fair PE ratio can vary quite a bit. Companies with higher expected growth or lower perceived risk often command a higher PE ratio, while those facing uncertainty or slower growth generally trade at a lower multiple.

Knife River currently trades at a PE ratio of 26.3x. For context, the average PE ratio among peers is 19.7x and the Basic Materials industry average is 15.7x. On the surface, this suggests Knife River might be priced at a premium compared to both peers and its sector.

However, Simply Wall St introduces the concept of a "Fair Ratio," which adjusts for factors like Knife River’s earnings growth, market cap, risk profile, and industry dynamics. This proprietary metric aims to pinpoint what would actually be a justifiable PE given the company’s unique situation. In other words, it is more tailored and forward-looking than simply lining up industry or peer averages.

Knife River’s Fair Ratio currently stands at 23.2x. Comparing this to the current market PE of 26.3x shows the shares are trading above what is justified by their fundamentals, even after accounting for growth and risk factors.

Result: OVERVALUED

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

Upgrade Your Decision Making: Choose your Knife River Narrative

Earlier we mentioned there’s an even better way to understand valuation, so let’s introduce you to Narratives. This feature lets you shape your investment story around Knife River by blending your own forecasts and assumptions with real company data.

A Narrative connects a company’s story to your expectations for its future revenue, earnings, and profit margins, ultimately producing your own fair value. This is more than just a number; it is your perspective made tangible, allowing you to clarify why you would buy, sell, or hold based on how your fair value compares to today’s price.

Narratives are intuitive, transparent, and accessible to everyone on Simply Wall St’s Community page, where millions of investors share their reasoning and update their views as news and earnings roll in. Narratives are always dynamic. When new information emerges, the underlying numbers and insights update instantly, so your investment thesis stays relevant.

For Knife River, some users may create an upbeat Narrative built on accelerating federal infrastructure spending and improving margins, leading them to set a fair value well above $130. Others may focus on persistent weather disruptions and slowing regional demand, estimating the company’s worth closer to $97. Narratives empower you to see every angle, so you can act with confidence when opportunity knocks.

Do you think there's more to the story for Knife River? Create your own Narrative to let the Community know!

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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