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Karat Packaging, Inc. (KRT)
:KRT
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Karat Packaging Inc
(NASDAQ:KRT)
Rating:71Outperform
Price Target:
$29.00
▲(7.81%Upside)
Positive Factors
Earnings
Shares are expected to open higher after a first-quarter beat and second-quarter guide above expectations.
Growth Opportunities
Karat's strong cash flow and proactive expansion of distribution capabilities are allowing it to capitalize on growth opportunities despite broader macro uncertainty.
Supply Chain Resilience
The company’s ability to flexibly source products from various countries makes the company resilient to potential tariff uncertainties and supply chain disruptions.
Negative Factors
Cost Pressures
The risk is that the price increases will not be enough to maintain margins and volumes could take a dive.
Earnings Miss
Fourth-quarter EPS missed expectations despite sales and gross margin that were in line, due to higher SG&A.
Tariff Risks
Tariffs loom as a big second-half risk, encouraging investors to proceed with caution until more tariff clarity comes.
Karat Packaging Inc (KRT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$540.06M
Dividend Yield6.81%
Average Volume (3M)87.37K
Price to Earnings (P/E)17.9
Beta (1Y)1.25
Revenue Growth6.21%
EPS Growth1.47%
CountryUS
Employees683
SectorConsumer Cyclical
Sector Strength58
IndustryPackaging & Containers
Share Statistics
EPS (TTM)0.33
Shares Outstanding20,076,506
10 Day Avg. Volume147,895
30 Day Avg. Volume87,368
Financial Highlights & Ratios
PEG Ratio3.59
Price to Book (P/B)3.90
Price to Sales (P/S)0.00
P/FCF Ratio12.84
Enterprise Value/Market Cap1.24
Enterprise Value/Revenue0.40
Enterprise Value/Gross Profit4.11
Enterprise Value/Ebitda2.91
Forecast
1Y Price Target
$35.00Price Target Upside30.11% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
Karat Packaging Inc Business Overview & Revenue Model
Company DescriptionKarat Packaging Inc. (KRT) is a leading manufacturer and distributor of environmentally friendly, disposable foodservice products. Operating primarily in the United States, the company offers a comprehensive range of products including cups, lids, food containers, cutlery, and other packaging solutions designed for restaurants, foodservice operators, and retail establishments. Karat Packaging is committed to sustainability and innovation, providing high-quality products that meet the evolving needs of its customers while minimizing environmental impact.
How the Company Makes MoneyKarat Packaging Inc. makes money through the sale of its disposable foodservice products to a diverse customer base, including restaurants, cafes, and retail outlets. The company generates revenue by manufacturing and distributing a broad array of packaging solutions, leveraging its extensive distribution network. Key revenue streams include direct sales to businesses and partnerships with distributors who supply Karat's products to end-users. Additionally, the company may benefit from strategic partnerships or collaborations that enhance its product offerings or expand its market reach. Karat Packaging's focus on environmentally friendly and innovative solutions also positions it to capitalize on the growing demand for sustainable packaging options in the foodservice industry.
Karat Packaging Inc Earnings Call Summary
Earnings Call Date:May 08, 2025
(Q1-2025)
| % Change Since: -0.15%|
Next Earnings Date:Aug 07, 2025
Earnings Call Sentiment Neutral
The earnings call highlights Karat Packaging Inc.'s strong sales growth and strategic supply chain diversification, alongside significant challenges in managing increased operating expenses and maintaining margins. The company's solid cash flow and liquidity are positive, but the decline in adjusted EBITDA and earnings per share indicate some underlying financial pressures.Q1-2025 Updates
Positive Updates
Strong Sales Growth
Karat Packaging Inc. achieved an 8.4% growth in net sales and a nearly 11% increase in sales volume year over year for the first quarter of 2025.
Diversification of Supply Chain
The company reduced sourcing from China from 20% at the end of 2024 to 15% by March 2025, with plans to further reduce to under 10% by the end of Q2 2025, moving production to countries like Malaysia, Indonesia, Vietnam, and Thailand.
Expansion of Online Business
Online sales experienced a nearly 20% increase during the first quarter, reflecting a strong focus on expanding this high-margin category.
New Distribution Center
The company opened a new 187,000 square feet distribution center near their headquarters in Chino, providing additional capacity to support growth.
Operating Cash Flow and Liquidity
Karat Packaging Inc. generated $7.7 million in operating cash flow and ended the quarter with $111.9 million in working capital and $46.7 million in financial liquidity.
Negative Updates
Increased Operating Expenses
Operating expenses increased by 11.6% due to higher shipping and transportation costs, increased rent expense due to the new distribution center, and higher marketing and professional service expenses.
Decline in Retail Channel Sales
Sales to the retail channel decreased by 3.2% compared to the prior year quarter.
Pressure on Gross Margin
Despite an 8.4% increase in gross profit, the gross margin remained consistent at 39.3%, with potential future pressure due to tariffs and higher freight costs.
Adjusted EBITDA and Earnings Decline
Adjusted EBITDA for the quarter was $11.9 million compared to $13.5 million in the prior year quarter, and adjusted diluted earnings per share decreased from 40¢ to 33¢.
Company Guidance
During Karat Packaging Inc.'s 2025 first quarter conference call, the company provided guidance on several key financial metrics. They reported an 8.4% increase in net sales, reaching $103.6 million, with a 10.9% increase in sales volume year over year. The gross margin remained stable at 39.3%, and the company generated an operating cash flow of $7.7 million for the quarter. The adjusted EBITDA was $11.9 million, with an adjusted EBITDA margin of 11.5%. Looking forward, Karat Packaging expects net sales for the second quarter to grow by high single digits to low double digits compared to the previous year, with a gross margin consistent with the first quarter and an adjusted EBITDA margin in the mid-teens. The company is also working to reduce its reliance on Chinese imports, aiming to decrease imports from China to under 10% by the end of the second quarter, while expanding its sourcing from countries like Malaysia, Indonesia, and Vietnam.Karat Packaging Inc Financial Statement Overview
Summary
Karat Packaging Inc. shows robust financial performance with consistent revenue growth and improving profitability margins. The reduction in debt levels and improvement in cash flows strengthen its financial position. However, fluctuations in EBIT margins and missing liability data for 2024 present potential risks.Income Statement
Karat Packaging Inc has shown consistent revenue growth over the years, with a revenue increase from $224.91 million in 2019 to $422.63 million in 2024. The Gross Profit Margin and Net Profit Margin have also improved, indicating enhanced cost management and profitability. However, the EBIT and EBITDA margins have fluctuated, suggesting some operational challenges.75
Positive
Balance Sheet
The company's debt levels have decreased significantly over the years, improving the Debt-to-Equity Ratio. However, total liabilities were not reported for 2024, which creates some uncertainty. The equity ratio has improved over the years, reflecting stronger financial stability. Return on Equity (ROE) has shown positive trends, indicating effective use of equity to generate profits.65
Positive
Cash Flow
Operating cash flow has consistently increased, supporting robust free cash flow growth. The company has improved its ability to convert net income into cash flow, which is a positive indicator of cash management. The Free Cash Flow to Net Income Ratio is strong, indicating efficient management of capital expenditures.80
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 422.63M | 405.65M | 422.96M | 364.24M | 295.52M | Gross Profit |
| 164.33M | 153.04M | 132.09M | 107.83M | 89.13M | EBIT |
| 37.76M | 42.08M | 30.02M | 23.14M | 27.70M | EBITDA |
| 37.76M | 60.78M | 48.76M | 33.19M | 36.27M | Net Income Common Stockholders |
| 29.98M | 32.47M | 23.65M | 20.78M | 17.52M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 59.93M | 49.42M | 16.04M | 6.48M | 448.00K | Total Assets |
| 294.52M | 276.40M | 252.18M | 207.60M | 181.10M | Total Debt |
| 92.87M | 71.00M | 58.65M | 36.52M | 98.55M | Net Debt |
| 61.29M | 47.93M | 42.61M | 30.03M | 98.11M | Total Liabilities |
| 129.95M | 113.71M | 100.24M | 75.57M | 141.24M | Stockholders Equity |
| 155.57M | 154.12M | 141.68M | 122.90M | 32.40M |
| Cash Flow | Free Cash Flow | |||
| 43.91M | 44.05M | 14.73M | -3.70M | -21.93M | Operating Cash Flow |
| 47.98M | 53.38M | 29.47M | 8.68M | 14.55M | Investing Cash Flow |
| -5.86M | -30.17M | -17.84M | -13.28M | -37.35M | Financing Cash Flow |
| -31.29M | -16.17M | -2.07M | 10.64M | 22.45M |
Karat Packaging Inc Technical Analysis
Negative
26.90
Price Trends
27.81
Negative
28.44
Negative
27.78
Negative
Market Momentum
-0.33
Positive
35.78
Neutral
8.96
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For KRT, the sentiment is Negative. The current price of 26.9 is below the 20-day moving average (MA) of 30.38, below the 50-day MA of 27.81, and below the 200-day MA of 27.78, indicating a bearish trend. The MACD of -0.33 indicates Positive momentum. The RSI at 35.78 is Neutral, neither overbought nor oversold. The STOCH value of 8.96 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for KRT.
Karat Packaging Inc Risk Analysis
Karat Packaging Inc disclosed 56 risk factors in its most recent earnings report. Karat Packaging Inc reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Karat Packaging Inc Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | $1.10B | 35.14 | 4.64% | 0.60% | 3.80% | -20.92% | |
71 Outperform | $540.06M | 17.94 | 19.64% | 6.81% | 6.21% | 1.47% | |
68 Neutral | $2.52B | ― | -69.06% | 9.73% | 4.42% | 70.21% | |
66 Neutral | $555.87M | 53.13 | 3.69% | 3.68% | 3.92% | -73.64% | |
65 Neutral | $2.10B | ― | -13.85% | ― | -5.29% | 18.22% | |
62 Neutral | $6.88B | 11.07 | 2.77% | 4.28% | 2.67% | -24.94% | |
54 Neutral | $299.87M | ― | -3.89% | ― | 10.11% | 6.77% |
* Consumer Cyclical Sector Average
Performance Comparison
KRT
Karat Packaging Inc
26.90
0.03
0.11%
MYE
Myers Industries
14.87
0.92
6.59%
OI
O-I Glass
13.80
2.51
22.23%
TRS
Trimas
27.04
1.48
5.79%
PACK
Ranpak Holdings
3.56
-2.14
-37.54%
AMBP
Ardagh Metal Packaging
4.22
1.06
33.54%
Karat Packaging Inc Corporate Events
Private Placements and FinancingBusiness Operations and StrategyRegulatory Filings and Compliance
Karat Packaging Inc Announces Secondary Stock Offering
Neutral
Jun 12, 2025
On June 10, 2025, Karat Packaging Inc. announced a secondary offering of 1,500,000 shares of its common stock by certain members of its management team, with BofA Securities and William Blair & Company acting as joint lead book-runners. The company will not offer any shares or receive proceeds from this sale, which is conducted under a shelf registration statement filed with the SEC. The offering includes a 30-day option for underwriters to purchase an additional 225,000 shares. This move is part of the company’s strategic financial operations, potentially impacting its market positioning and stakeholder interests.
The most recent analyst rating on (KRT) stock is a Buy with a $36.00 price target. To see the full list of analyst forecasts on Karat Packaging Inc stock, see the KRT Stock Forecast page.
Dividends
Karat Packaging Declares Quarterly Dividend Announcement
Positive
May 7, 2025
On May 6, 2025, Karat Packaging Inc. announced that its Board of Directors declared a regular quarterly cash dividend of $0.45 per share on the company’s common stock. This dividend is scheduled to be paid on or about May 23, 2025, to stockholders of record as of May 16, 2025, reflecting the company’s commitment to providing value to its shareholders.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.