Is Knowles Corporation (NYSE:KN) stock price struggling with its mixed finances?

0 1 3 minutes read

Is Knowles Corporation (NYSE:KN) stock price struggling with its mixed finances?

After watching Knowles (NYSE:KN)’s recent performance, it’s hard to get excited when its stock has dropped 25% in the past three months. However, we decided to look at the financial situation of the company to determine if they are related to price declines. Stock prices are usually driven by the company’s financial performance, so we decided to pay more attention to the company’s financial performance. In particular, we will focus on Knowles’ ROE today.

Return on equity, or ROE, is a key measure to evaluate the effectiveness of corporate management’s use of corporate capital. In other words, this is a profit rate that measures the return on capital provided by the company’s shareholders.

We found 21 U.S. stocks are expected to pay dividend yields of more than 6% next year. Check out the full list for free.

this Fair return formula yes:

Return on equity = Net profit (from continuing operations) ÷ Shareholder equity

Therefore, based on the above formula, the ROE of Knowles is:

3.1% = $23 million ÷ $756 million (based on the twelve months ended December 2024).

“Reward” is profits over the past twelve months. So, this means that for every $1 invested by shareholders, the company’s profit is $0.03.

Check out our latest analysis of knowledge

So far, we have learned that ROE can measure the effectiveness of a company’s profit generation. Now, we need to evaluate the company’s profits of reinvestment or “retainment” for future growth, which gives us some insight into the company’s growth potential. Assume that all other aspects are equal, companies with higher growth rates are usually higher growth rates than companies without the same functionality.

Obviously, Knowles’ Roe is pretty low. Not only that, the company’s ROE is completely insignificant even compared to the industry average of 10%. Given this, it is not surprising that Knowles has seen a 16% drop in net income over the past five years. However, there may be other factors that lead to a decline in returns. For example, the business is allocated insufficient capital, or the company’s expenditure ratio is very high.

So in the next step, we compared Knowles to the industry’s performance and were disappointed to find that despite the company’s revenue, the industry has been growing its earnings at a rate of 13% over the past few years.

New York Stock Exchange: Past Earnings Growth April 12, 2025

Return growth is an important indicator to consider when evaluating stocks. Investors need to determine what needs to be determined next is the expected earnings growth or the lack of stock price. Doing so will help them determine whether the future of the stock is promising or ominous. What’s worth today? The intrinsic value infographic in our free research report helps to visualize whether KN is currently misunderstood by the market.

Knowles does not pay any regular dividends, which means the company is retaining all profits, which makes us wonder why it should retain its revenue if they cannot be used to grow its business. So there may be other factors here that could hinder growth. For example, the business faces some headwinds.

Overall, we have some contradictions about Knowles’ performance. Despite the high reinvestment rate of the company, low ROE means that all reinvestment does not bring any benefits to its investors, and in addition, it has negatively impacted earnings growth. That being said, from current analyst estimates, we find that the company’s revenue growth rate is expected to improve. Are these analysts based on broad expectations for the industry or expectations of the company’s fundamentals? Click here to get our analyst’s forecast page.

Have any feedback on this article? Care about content? Get in touch Be with us directly. Also, the email editor team (at) simple wallst.com.

This article by Simply Wall ST is essentially general. We provide comments based on historical data, analysts use only unbiased approaches to forecasting, and our articles are not meant to be financial advice. It does not constitute a recommendation to buy or sell any shares, nor does it constitute your target or financial position. We aim to bring you long-term focus analysis driven by fundamental data. Please note that our analysis may not consider the latest price-sensitive company announcements or qualitative materials. Simple Wall ST has no place in any of the stocks mentioned.