Kennametal Inc (KMT) stock analysis

P/E below its 5-year median

Kennametal's P/E of 3.2 is below its own 5-year median of 17.7.

P/E below the industry

Kennametal's P/E of 3.2 is below the Industrial and Commercial Machinery and Computer Equipment median of 27.5.

EV/EBITDA below its 5-year median

Kennametal's EV/EBITDA of 2.9 is below its 5-year median of 13.4.

P/B below the industry

Kennametal's price-to-book of 1.03 is below the Industrial and Commercial Machinery and Computer Equipment median of 2.71.

Trading below fair value

The share price of $24.59 is below our fair value estimate of $172.59.

Margin of safety over 20%

The price is 85.8% below fair value, more than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew 4.3% a year over the last three fiscal years, short of the 10% we look for.

EPS growing 10%+ a year

Diluted EPS grew 44.7% a year over the last three fiscal years.

Earnings growth accelerating

Net income grew 526% over the last twelve months, against a 5-year average of 44.5% a year.

Growing faster than the industry

Revenue grew 32.5% over the last twelve months; the Industrial and Commercial Machinery and Computer Equipment median is 10.1%.

Guidance raised

Kennametal raised its full fiscal year 2026 Adjusted EPS outlook on May 6, 2026.

Gross margin improving

Gross margin was 50.6% over the last twelve months, against 30.3% a year earlier.

Return on equity under 15%

Return on equity was 38.0% over the last twelve months and averaged 12.1% over five years; we look for 15% on both.

Return on capital over 10%

Return on invested capital was 28.2%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

Kennametal's return on equity of 38.0% is above the Industrial and Commercial Machinery and Computer Equipment median of 7.0%.

Earnings grew over 5 years

Net income grew 44.5% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 22.5% over the last twelve months, against a 5-year average of 7.5%.

Net margin above the industry

Kennametal's net margin of 22.5% is above the Industrial and Commercial Machinery and Computer Equipment median of 4.8%.

High debt

Debt is 60.0% of shareholders' equity, above the 40% we consider low.

Debt rising against equity

Debt to equity rose from 44.5% five years ago to 60.0%.

Debt not well covered by cash flow

Operating cash flow over the last twelve months equals -20.4% of total debt; we look for at least 20%.

Interest well covered

Operating income covers interest expense 24.1 times.

Short-term assets cover short-term debts

Current assets are 3.45 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 3.11; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Kennametal paid dividends worth 2.4% of the share price over the last twelve months.

Yield below Treasuries

The 2.4% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Kennametal yields 2.4%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 10 fiscal years.

Covered by earnings

Dividends take 10.3% of net income.

Cash-flow cover

Needs dividends paid and free cash flow.