Karat Packaging Inc. (KRT) stock analysis

P/E below its 5-year median

Karat Packaging's P/E of 15.6 is below its own 5-year median of 16.6.

P/E below the industry

Karat Packaging's P/E of 15.6 is below the Miscellaneous Plastics Products median of 30.9.

EV/EBITDA above its 5-year median

Karat Packaging's EV/EBITDA of 10.3 is above its 5-year median of 9.8.

P/B above the industry

Karat Packaging's price-to-book of 4.49 is above the Miscellaneous Plastics Products median of 3.56.

Trading below fair value

The share price of $36.75 is below our fair value estimate of $44.98.

Margin of safety under 20%

The price is 18.3% below fair value, less than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew 3.4% a year over the last three fiscal years, short of the 10% we look for.

EPS growing under 10% a year

Diluted EPS grew 9.4% a year over the last three fiscal years.

Earnings growth accelerating

Net income grew 56.1% over the last twelve months, against a 5-year average of 12.4% a year.

Growing faster than the industry

Revenue grew 11.0% over the last twelve months; the Miscellaneous Plastics Products median is 9.2%.

Guidance issued

The latest outlook (2026 third quarter Adjusted EBITDA margin, Aug 6, 2026) was issued for the first time, so it neither adds nor takes away points.

Gross margin improving

Gross margin was 40.3% over the last twelve months, against 38.0% a year earlier.

Return on equity over 15%

Return on equity was 29.8% over the last twelve months and averaged 21.3% over five years.

Return on capital over 10%

Return on invested capital was 33.0%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

Karat Packaging's return on equity of 29.8% is above the Miscellaneous Plastics Products median of 7.1%.

Earnings grew over 5 years

Net income grew 12.4% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 9.4% over the last twelve months, against a 5-year average of 6.6%.

Net margin above the industry

Karat Packaging's net margin of 9.4% is above the Miscellaneous Plastics Products median of 5.0%.

Low debt

Debt is 14.1% of shareholders' equity, under the 40% we consider low.

Debt falling against equity

Debt to equity fell from 35.4% five years ago to 14.1%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 283% of total debt.

Interest well covered

Operating income covers interest expense 34.1 times.

Short-term assets cover short-term debts

Current assets are 1.83 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 6.22; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Karat Packaging paid dividends worth 5.0% of the share price over the last twelve months.

Yield above Treasuries

The 5.0% yield is above the 4.4% on a 1-year Treasury.

Yield in the top quarter

The top quarter of US dividend payers yield 3.8% or more; Karat Packaging yields 5.0%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 5 fiscal years.

Covered by earnings

Dividends take 76.9% of net income.

Covered by free cash flow

Dividends take 56.4% of free cash flow.