Knife River (KNF): Assessing Valuation as Acquisition Strategy Faces Margin and Cost Concerns

Knife River (KNF) is drawing fresh scrutiny after recent updates questioned whether its acquisition-driven growth is actually benefiting long-term investors. Despite rising revenue and a healthy backlog, concerns about mounting costs and shrinking margins are now at the forefront.

See our latest analysis for Knife River.

Knife River’s share price has tumbled 31% year-to-date, with momentum turning negative in recent months despite earlier signs of a short-term rebound. The latest 1-month share price return of 7% offered brief relief, but the total shareholder return for the past year still stands at a loss of over 31%. This reflects persistent doubts around profitability and a cautious outlook on valuation.

If you’re reassessing your strategy given KNF’s volatility, now is an ideal moment to broaden your search and discover fast growing stocks with high insider ownership.

So with Knife River trading well below analyst targets, amid solid revenues but mixed fundamentals, is this an overlooked buying opportunity or is the market already adjusting for the risks to future growth?

Most Popular Narrative: 29.6% Undervalued

Knife River's most broadly followed narrative assigns a fair value of $98.22 per share, compared to the recent close of $69.11. This significant difference highlights expectations for a turnaround, driven by anticipated earnings growth and a potential industry recovery.

"Knife River's record $1.3 billion backlog and exposure to public infrastructure projects, supported by robust, multiyear federal and state Department of Transportation funding (including 60% of IIJA funds still to be spent), positions the company for strong, sustained revenue growth well into 2026 and beyond."

Read the complete narrative.

Wondering what supports this ambitious target? The narrative is built on projections of rising revenues, higher profit margins, and a profit multiple often seen in sectors with rapid growth. Interested in the assumptions that put Knife River on this potential trajectory? The full narrative offers several insights.

Result: Fair Value of $98.22 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing infrastructure funding delays in Oregon and unpredictable weather disruptions could quickly undermine the optimistic trajectory for Knife River’s recovery.

Find out about the key risks to this Knife River narrative.

Another View: Price-to-Earnings Concerns

While analysts see upside based on anticipated earnings growth, looking at Knife River's price-to-earnings ratio reveals a different story. Shares trade at 26.4 times earnings, which is higher than both the peer average (17.4x) and the global industry average (14.8x). Even the fair ratio, which could signal where the market might settle, stands at 20.7x. This is well below the current valuation. This premium suggests investors face extra risk if lofty expectations are not met. So, can continued execution and shifting sentiment keep up with such high multiples?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Knife River Narrative

If you have a different perspective or want to examine the numbers directly, you can easily craft your own outlook in just a few minutes. Do it your way.

A great starting point for your Knife River research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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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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