KNTK

We rate Kinetik Holdings Inc. (KNTK) as Avoid with a composite score of 38.7/100 at a current price of $44.20. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in stability (37th percentile) and momentum (36th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (23th percentile) and value (24th percentile) tempers our overall conviction. We assign a No Moat rating (26/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; sustainability of the current growth rate; valuation compression risk if growth disappoints. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Kinetik Holdings Inc. holds a top-quartile position (#0 of 50) within the Transportation, Communications, Electric, Gas, And Sanitary Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 38.7/100 places it at rank #3713 in our full 7,333-stock universe. At $6.8B in market capitalization, Kinetik Holdings Inc. is a mid-cap player in the Transportation, Communications, Electric, Gas, And Sanitary Services space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 29%, though momentum at the 36th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 49% (-6.1pp vs sector) narrow to operating margins of 11% (-6.3pp vs sector) and net margins of 11.6%, yielding a gross-to-net conversion rate of 24%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $44.20, Kinetik Holdings Inc. is trading at a premium to fundamental value. Our value factor score of 24/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 15.1x (roughly in line with the sector median of 16.9x), EV/EBITDA of 36.4x (at a premium), P/S of 1.7x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to Kinetik Holdings Inc.. The stock presents a balanced risk profile: below-average price stability (37th percentile) and weak quality scores (23th percentile). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: below-average price stability (37th percentile); weak quality scores (23th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 37th percentile and quality factor at the 23th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 49% provide a buffer against cost pressures; a 7.44% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Kinetik Holdings Inc.'s capital allocation as Poor. Key concerns include low returns on equity (2.3%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Kinetik Holdings Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Kinetik Holdings Inc. receives a Avoid rating with a composite score of 38.7/100 (rank #3713 of 7,333). Our quantitative framework assigns a No Moat (26/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 30/100.

Our analysis does not support a constructive view on Kinetik Holdings Inc. at this time. The combination of limited competitive advantages, medium uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.