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Kadant Inc. (KAI) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Kadant Inc. (KAI)

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Intrinsic Value (DCF)

Current$311.65
→
Intrinsic$265.04
-15%
$174.63$265.04$436.79
Market implies 20% growth for 5 years
KAI appears fairly valued — current price aligns with our DCF estimate.
At $312, the market prices in continued high-teens cash flow growth (20%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $175 → Bull $437. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →12%14%16%18%
8%$324$354$385$419
10%$223$243$265$288
12%$167$182$198$216
14%$132$144$156$170

Bull Case

  • Bull case ($437) offers 40% upside at 19% growth, 9% discount

Bear Case

  • Bear case ($175) implies 44% downside at 13% growth, 12% discount
  • Price reflects 20% growth expectations vs 16% historical — high bar to clear
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5-Year Free Cash Flow Projection

Year 1$155.56M
Year 2$180.24M
Year 3$208.83M
Year 4$241.96M
Year 5$280.35M
Terminal$4.13B

📐 Model Inputs

Growth Rate15.9%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$134.26MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is KAI stock undervalued or overvalued?
🟡 FAIRLY VALUED

KAI trades at $311.65, within 10% of our $265.04 intrinsic value estimate. At 10.0% WACC and 15.9% FCF growth, the market is pricing in assumptions roughly aligned with the 5-year historical CAGR. The valuation range spans $173.33 (bear) to $396.10 (bull).

What is KAI's intrinsic value?

Using a 5-year DCF model: Base FCF of $134M, projected at 15.9% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $228M net debt and dividing by 0.01B shares: Bear $173.33 | Base $265.04 | Bull $396.10. Current price $311.65 implies -13% to base case.

How is KAI's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 15.9% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($3.35B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 24.9x.