Knowles Corporation (KN) DCF Valuation & Fundamental Primer
Knowles Corporation (KN) currently trades at $22.39 with an enterprise value of $3.44B. Our proprietary institutional model rates Knowles Corporation at 85/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 2.8% vs. historical growth of 21.4% (Substantial Margin of Safety).
Institutional fundamental teardown of Knowles Corporation (KN) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Knowles Corporation (KN) 3-Scenario DCF Valuation Range
Stress-test KN's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $22.39).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $48.22 +115% | $51.11 +128% | $54.49 +143% | $58.47 +161% | $63.26 +183% |
| 9.3% | $43.53 +94% | $45.81 +105% | $48.42 +116% | $51.46 +130% | $55.02 +146% |
| 10.0% | $39.67 +77% | $41.50 +85% | $43.58 +95% | $45.95 +105% | $48.69 +117% |
| 10.8% | $36.45 +63% | $37.95 +69% | $39.62 +77% | $41.52 +85% | $43.68 +95% |
| 11.5% | $33.72 +51% | $34.96 +56% | $36.34 +62% | $37.88 +69% | $39.61 +77% |
Institutional Software Quality Scorecard (85/100 · Grade A)
Strong fundamentals, above-average cash generation, and robust competitive positioning.
Elite deferred revenue float; FCF exceeds operating income by >20%
Elevated equity dilution; SBC consumes substantial operating cash flow
Elite Tier-1 SaaS compounder with high gross margin and superior Rule of 40
Zero-debt fortress balance sheet with abundant net cash liquidity
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 198% of EBIT driven by upfront annual collections
- Top-quartile software unit economics: 80.8% gross margin and 52.9% Rule of 40 score
- Fortress capital structure: Zero debt and $276.7M in pure net cash
Key Operational & Dilution Risks
- Substantial SBC dilution drag: SBC is 20.7% of revenue ($77.4M)
Reverse-DCF Solver: What Growth is Priced Into KN?
The current share price only requires 2.8% 5-year CAGR (15.1% dilution-adjusted), well below historical growth of 21.4%. If the company maintains baseline execution, there is asymmetric upside.
Headline Reverse-DCF ignores Stock-Based Compensation (20.7% of revenue) and annual share dilution (1.8%/yr). Accounting for both requires 15.1% 5-year revenue CAGR to justify $22.39/sh on a true per-share economic cash flow basis.
Knowles Corporation (KN) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $373.9M | $373.9M | $454.0M | $551.1M | $669.0M | $812.2M | $986.0M |
| Gross Profit | $302.1M | $302.1M | $366.8M | $445.3M | $540.6M | $656.3M | $796.7M |
| Operating Income (EBIT) | $59.5M | $59.5M | $72.2M | $87.6M | $106.4M | $129.1M | $156.8M |
| Stock-Based Compensation (SBC) | $77.4M | $77.4M | $94.0M | $114.1M | $138.5M | $168.1M | $204.1M |
| Unlevered Free Cash Flow (FCF) | $117.8M | $117.8M | $143.0M | $173.6M | $210.7M | $255.8M | $310.6M |
| SBC-Adjusted True Cash Flow | $40.4M | $40.4M | $49.0M | $59.5M | $72.3M | $87.7M | $106.5M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -29.0 + 0.77 × (Rule of 40) · R² = 56%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Knowles Corporation | KN | $1.91B | $373.9M | 80.8% | 31.5% | 52.9% | 20.7% | 4.4× |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 4.4× | $1.63B | $1.91B | $22.39 | 0.0% |
| -20% Multiple Compression | 3.5× | $1.30B | $1.58B | $18.56 | -20.0% |
| -35% Multiple Compression | 2.8× | $1.06B | $1.34B | $15.69 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $1.87B | $2.15B | $25.20 | +14.7% |
Frequently Asked Questions: Knowles Corporation (KN) Valuation
What is Knowles Corporation (KN)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, Knowles Corporation (KN) has a Base Case implied value of $43.58 per share (with a Bear Case of $20.24 and a Bull Case of $76.55), compared to its current price of $22.39. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Knowles Corporation (KN)'s Rule of 40 score and Free Cash Flow margin?
Knowles Corporation achieves a Rule of 40 score of 52.9%, combining a 21.4% revenue growth run-rate with a 31.5% TTM free cash flow margin on $373.9M in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into KN stock according to Reverse-DCF analysis?
At $22.39 per share (Enterprise Value of $1.63B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 2.8%, compared to Knowles Corporation's historical CAGR of 21.4%. Overall market expectations are rated as "Substantial Margin of Safety".
How does Knowles Corporation compare to Software & Cloud Services software peers?
Knowles Corporation (KN) earns an institutional Software Quality Score of 85/100 (Grade A — High-Quality Compounder). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact Knowles Corporation (KN)'s valuation?
Knowles Corporation recorded $77.4M in TTM stock-based compensation (20.7% of revenue). When treating SBC as a cash-equivalent compensation expense, Knowles Corporation's SBC-adjusted free cash flow yield is 2.1%, scoring 10/25 on our Shareholder Dilution Friction pillar.