Value
4.7/10data confidence 83%| Component | Sub-score |
|---|---|
| P/E | 6.1 |
| P/S | 8.9 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 5.6 |
| PEG | 3.3 |
- ▸Forward P/E: 22.9x
- ▸PEG: 3.61
KRT · Why this verdict
Why Karat Packaging (KRT) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results. How we score · Editorial policy
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VerdictSELL
Overall score5.9/10
ConfidenceMEDIUM
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
Karat Packaging is a high-return (31% ROE) packaging business with accelerating revenue and a 3-of-4 earnings beat streak, but the shares trade 25.4% above the analyst target at a forward P/E of 22.7x, which leaves a poor reward-to-risk.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
ROE is 31% with a Piotroski F-Score of 9/9 and a quality score of 6.2/10, ranking best-in-class on margins versus peers. Quality breakdown | ROE should stay above 25% and the Piotroski F-Score should remain at 8 or higher over 12 months. | →Stable |
| CounterFree cash flow covers only 62% of net income, an earnings quality warning, and gross margin is modest at 3.1/10. | ||
Quarterly revenue rose to $136.3M in June 2026 from $124.0M a year earlier, with the next quarter estimated at $140.3M. Revenue quarters | Quarterly revenue should exceed the $140.3M estimate and keep growing double digits over 12 months. | →Stable |
| CounterRevenue is seasonal, and the March 2026 quarter at $116.9M was below the same quarter's $103.6M by only 13%, so growth may be slowing. | ||
EPS beat estimates in 3 of the last 4 quarters, including $1.48 against $0.51 in August 2026, but 8 of the prior 12 quarters were misses. Last 4 quarters | Quarterly EPS should hold above $0.50 and meet estimates in the November 2026 report. | →Stable |
| CounterThe August print was far above a $0.34 run rate and may include one-time gains, so earnings could fall back sharply. | ||
At $53.00 the shares trade 25.4% above the $39.52 analyst target, with a forward P/E of 22.7x and a PEG of 3.25. Analyst target | Earnings growth should lift analyst targets toward $53 over the next 12 months, otherwise the price is stretched. | →Stable |
| CounterAnalyst targets may lag the strong August results, and institutions are accumulating, which can support a premium. | ||
Insiders sold $598,985 of stock in 4 transactions over 90 days (0.057% of market cap) with no purchases. Insider | Insider selling should remain under 0.1% of market cap over the next 12 months. | →Stable |
| CounterThe amount is small relative to market cap, and institutional holder change is a strong 9.9/10. | ||
ROE is 31% with a Piotroski F-Score of 9/9 and a quality score of 6.2/10, ranking best-in-class on margins versus peers.
→StableQuality breakdown
- Expectation
- ROE should stay above 25% and the Piotroski F-Score should remain at 8 or higher over 12 months.
CounterFree cash flow covers only 62% of net income, an earnings quality warning, and gross margin is modest at 3.1/10.
Quarterly revenue rose to $136.3M in June 2026 from $124.0M a year earlier, with the next quarter estimated at $140.3M.
→StableRevenue quarters
- Expectation
- Quarterly revenue should exceed the $140.3M estimate and keep growing double digits over 12 months.
CounterRevenue is seasonal, and the March 2026 quarter at $116.9M was below the same quarter's $103.6M by only 13%, so growth may be slowing.
EPS beat estimates in 3 of the last 4 quarters, including $1.48 against $0.51 in August 2026, but 8 of the prior 12 quarters were misses.
→StableLast 4 quarters
- Expectation
- Quarterly EPS should hold above $0.50 and meet estimates in the November 2026 report.
CounterThe August print was far above a $0.34 run rate and may include one-time gains, so earnings could fall back sharply.
At $53.00 the shares trade 25.4% above the $39.52 analyst target, with a forward P/E of 22.7x and a PEG of 3.25.
→StableAnalyst target
- Expectation
- Earnings growth should lift analyst targets toward $53 over the next 12 months, otherwise the price is stretched.
CounterAnalyst targets may lag the strong August results, and institutions are accumulating, which can support a premium.
Insiders sold $598,985 of stock in 4 transactions over 90 days (0.057% of market cap) with no purchases.
→StableInsider
- Expectation
- Insider selling should remain under 0.1% of market cap over the next 12 months.
CounterThe amount is small relative to market cap, and institutional holder change is a strong 9.9/10.
Per-dimension breakdown
Quality
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 4.9 |
| Gross margin | 3.1 |
| Op margin | 3.5 |
| Net margin | 5.1 |
| Current ratio | 7.8 |
| FCF quality | 4.8 |
| Moat | 6.9 |
| Piotroski F | 10.0 |
- ▸Excellent ROE: 31%
- ▸Earnings quality warning: 62% FCF/NI
- ▸Strong Piotroski F-Score: 9/9
Growth
7.5/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.0 |
| EPS growth | 10.0 |
Momentum
4.6/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 0.0 |
| OBV | 10.0 |
| MA position | 6.0 |
| Volume | 1.3 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
4.8/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.0 |
| Analyst rating | 5.0 |
| Price target | 3.2 |
- ▸Below analyst target
Insider
5.8/10data confidence 100%| Component | Sub-score |
|---|---|
| materiality | 4.5 |
| insider conviction | 2.0 |
| holder change | 9.9 |
| notable moves | 7.0 |
- ▸Modest insider selling — $598,985 (0.056% of mkt cap)
- ▸Institutions accumulating
Peer rank
6.1/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 2.3 |
| quality rank | 8.3 |
| growth rank | 6.1 |
- ▸Superior ROE vs peers
- ▸Best-in-class margins
Technical
7.6/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 7.4 |
| support resistance | 6.2 |
| 52w position | 9.1 |
Risk (lower is worse)
7.1/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 5.9 |
| days to cover | 7.2 |
| volatility | 5.5 |
| beta | 8.4 |
| debt equity | 8.3 |
Catalyst
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| dividend safety | 3.8 |
| news activity | 6.0 |
- ▸Strong earnings: 3B/1M
- ▸Earnings in 7 days
- ▸Yield trap warning: high yield but unsafe
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:4.6>=4.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- ASYMMETRY:-4.7=NEGATIVE
- EARNINGS_PROXIMITY:7d<=7d
Warning (1)
- MOMENTUM:4.6<5.5 (soft — BUY_NOW allowed but watch)
Reward-to-Risk
-4.66
Upside
-26.0%
Downside
5.6%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — MCap $1.1B<$5B
Investment implication
The F-path SELL output reflects an overall score of 4.4 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Technical at 7.6) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-4.7=NEGATIVE, EARNINGS_PROXIMITY:7d<=7d) reinforce the read. Current asymmetry R:R is -4.66 — supplementary context, not the trigger for this path.
The strongest dimensions are Technical at 7.6, Growth at 7.5, and Risk (lower is worse) at 7.1; the weakest are Momentum at 4.6, Value at 4.7, and Sentiment at 4.8. The V9 engine flagged 2 failed gates with 1 warning, producing an asymmetric reward-to-risk of -4.66 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1High Returns Strong Piotroski
Trip ifROE falls below 20% from the current 31%.
- P2Accelerating Revenue Growth
Trip ifQuarterly revenue falls below $124M from the current $136M.
- P3Large August Earnings Beat
Trip ifEPS surprise stays below 0% for 2 consecutive quarters.
- P4Price Far Above Analyst Target
Trip ifForward P/E exceeds 30x from the current 22.7x.
- P5Modest Insider Selling
Trip ifInsider selling exceeds 0.5% of market cap over a 90-day window.