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Relative valuation derived from Materials sector median benchmarks. Model weights: EV/EBITDA (40%), P/B (35%), P/S (25%). Multiples adjusted for extreme outliers and non-recurring volatility.
Auditing capital efficiency...
Quality Profile Audit
Score: 50GRADE C+
Composite assessment of profitability, capital efficiency, and financial strength. Top-tier entities demonstrate sustainable cash flow generation.
Return on Equity
Profit generated per dollar of shareholder equity
22.1%
Sector: 3.3%
Dividend Analysis audit
HIGH YIELD
6.94%
Trailing Yield
$6.94
Per $100 Invested
High yield — monitor payout sustainability closely.
Est. Payout Ratio
117%HIGH
Analyst Projections
Analyst Consensus
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Based on our 6-factor quantitative model, Karat Packaging Inc. (KRT) receives a "Hold" rating with a composite score of 47.8/100, ranked #620 out of 4446 stocks. Key factor scores: Quality 50/100, Value 66/100, Momentum 44/100. This is quantitative analysis only — not investment advice.
Karat Packaging Inc. (KRT) Stock Analysis — April 2026 Rating, Price, and Forecast
Company Overview — What Does Karat Packaging Inc. Do?
Karat Packaging Inc. manufactures and distributes single-use disposable products in plastic, paper, biopolymer-based, and other compostable forms used in various restaurant and foodservice settings. It provides food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves, and other products under the Karat Earth brand. The company offers its products to domestic and regional distributors, restaurant chains, retail establishments, and online customers. It also provides new product development, design, printing, and logistics services. Karat Packaging Inc. was founded in 2000 and is based in Chino, California. Karat Packaging Inc. (KRT) is classified as a small-cap stock in the Materials sector, specifically within the Rubber And Plastic Products industry. The company is led by CEO Alan Yu and employs approximately 680 people. With a market capitalization of $565M, KRT is one of the notable companies in the Materials sector.
Karat Packaging Inc. (KRT) Stock Rating — Hold (April 2026)
As of April 2026, Karat Packaging Inc. receives a Hold rating with a composite score of 47.8/100 and 3 out of 5 stars from the Blank Capital Research quantitative model.KRT ranks #620 out of 4,446 stocks in our coverage universe. Within the Materials sector, Karat Packaging Inc. ranks #33 of 284 stocks, placing it in the top quartile of its Materials peers. The rating is generated by a multi-factor model that weighs quality (30%), momentum (25%), value (15%), investment (10%), stability (10%), and short interest (10%).
KRT Stock Price and 52-Week Range
Karat Packaging Inc. (KRT) currently trades at $29.78. The stock lost $0.04 (0.1%) in the most recent trading session. The 52-week high for KRT is $32.68, which means the stock is currently trading -8.9% from its annual peak. The 52-week low is $20.61, putting the stock 44.5% above its annual trough. Recent trading volume was 56K shares, suggesting relatively thin trading activity.
Is KRT Overvalued or Undervalued? — Valuation Analysis
Karat Packaging Inc. (KRT) carries a value factor score of 66/100 in the Blank Capital model, indicating fair valuation relative to historical norms. The trailing price-to-earnings ratio is 16.86x, compared to the Materials sector average of 26.50x — a discount of 36%. The price-to-book ratio stands at 3.73x, versus the sector average of 2.83x. The price-to-sales ratio is 1.26x, compared to 0.74x for the average Materials stock. On an enterprise value basis, KRT trades at 13.24x EV/EBITDA, versus 6.01x for the sector.
Overall, KRT's valuation appears roughly in line with sector benchmarks, suggesting the market is pricing the stock fairly given its current fundamentals and growth trajectory. Neither deep value nor significantly overpriced, the stock occupies a middle ground on valuation.
Karat Packaging Inc. Profitability — ROE, Margins, and Quality Score
Karat Packaging Inc. (KRT) earns a quality factor score of 50/100, indicating solid business quality with consistent operational execution. The return on equity (ROE) is 22.1%, compared to the Materials sector average of 3.3%, which demonstrates strong shareholder value creation. Return on assets (ROA) comes in at 12.1% versus the sector average of 0.6%.
On a margin basis, Karat Packaging Inc. reports gross margins of 38.0%, compared to 29.8% for the sector. The operating margin is 9.4% (sector: 6.0%). Net profit margin stands at 7.5%, versus 3.0% for the average Materials stock. Revenue growth is running at 10.6% on a trailing basis, compared to 1.8% for the sector. The overall profitability profile is adequate, though there may be room for margin expansion.
KRT Debt, Balance Sheet, and Financial Health
Karat Packaging Inc. has a debt-to-equity ratio of 83.0%, compared to the Materials sector average of 41.0%. Leverage is within a manageable range for the industry, though investors should monitor debt trends over time. The current ratio is 2.30x, indicating strong short-term liquidity. Total debt on the balance sheet is $45M. Cash and equivalents stand at $24M.
KRT has a beta of 0.66, meaning it is less volatile than the S&P 500, making it a relatively defensive holding. The stability factor score for Karat Packaging Inc. is 57/100, reflecting average volatility within the normal range for its sector.
Karat Packaging Inc. Revenue and Earnings History — Quarterly Trend
In TTM 2026, Karat Packaging Inc. reported revenue of $465M and earnings per share (EPS) of $1.57. Net income for the quarter was $35M. Gross margin was 38.0%. Operating income came in at $44M.
In FY 2025, Karat Packaging Inc. reported revenue of $468M and earnings per share (EPS) of $1.57. Net income for the quarter was $33M. Gross margin was 36.8%. Revenue grew 10.7% year-over-year compared to FY 2024. Operating income came in at $41M.
In Q3 2025, Karat Packaging Inc. reported revenue of $125M and earnings per share (EPS) of $0.36. Net income for the quarter was $8M. Gross margin was 34.5%. Revenue grew 10.4% year-over-year compared to Q3 2024. Operating income came in at $9M.
In Q2 2025, Karat Packaging Inc. reported revenue of $124M and earnings per share (EPS) of $0.55. Net income for the quarter was $11M. Gross margin was 39.6%. Revenue grew 10.1% year-over-year compared to Q2 2024. Operating income came in at $17M.
Over the past 8 quarters, Karat Packaging Inc. has demonstrated a growth trajectory, with revenue expanding from $113M to $465M. Investors analyzing KRT stock should weigh these quarterly trends alongside the valuation and quality metrics discussed above.
KRT Dividend Yield and Income Analysis
Karat Packaging Inc. (KRT) currently pays a dividend yield of 6.9%. At this yield, a $10,000 investment in KRT stock would generate approximately $$694.00 in annual dividend income. This compares to the Materials sector average dividend yield of 0.5%, meaning KRT offers above-average income for its sector. The net margin of 7.5% provides reasonable coverage for the dividend, though investors should monitor payout sustainability.
KRT Momentum and Technical Analysis Profile
Karat Packaging Inc. (KRT) has a momentum factor score of 44/100, reflecting neutral trend characteristics. The stock is neither significantly outperforming nor underperforming the broader market on a momentum basis. The investment factor score is 29/100, which measures capital allocation efficiency and asset growth patterns. The short interest score of 32/100 signals elevated short interest, which can indicate bearish sentiment among institutional investors.
KRT vs Competitors — Materials Sector Ranking and Peer Comparison
Comparing KRT against the S&P 500 benchmark is also instructive for understanding relative performance. Investors can view the full KRT vs S&P 500 (SPY) comparison to assess how Karat Packaging Inc. stacks up against the broader market across all factor dimensions.
KRT Next Earnings Date
No upcoming earnings date has been announced for Karat Packaging Inc. (KRT) at this time. Check the earnings calendar for the latest scheduling updates across all stocks in our coverage universe.
Should You Buy KRT? — Investment Thesis Summary
Karat Packaging Inc. presents a balanced picture with arguments on both sides. The value score of 66/100 suggests attractive pricing relative to fundamentals.
In summary, Karat Packaging Inc. (KRT) earns a Hold rating with a composite score of 47.8/100 as of April 2026. The rating is derived from the Blank Capital Research methodology, which combines six factor dimensions into a single quantitative ranking. Investors should consider these quantitative signals alongside their own fundamental research, risk tolerance, and investment time horizon before making buy or sell decisions on KRT stock.
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Institutional Research Dossier
Karat Packaging Inc. (KRT) Deep Dive Analysis
Published on March 24, 2026
Action RatingHold
Sections
Executive Summary
Karat Packaging Inc. receives a Hold rating, driven by a mixed assessment of its financial performance and valuation. While the company exhibits strong profitability metrics compared to its sector, its negative free cash flow and relatively high debt levels raise concerns. The current valuation appears fair, but the lack of a clearly defined economic moat and potential risks associated with raw material costs and regulatory changes warrant a cautious approach.
The company's growth strategy, focused on expanding its product offerings and customer base, is promising. However, the competitive landscape and the inherent cyclicality of the foodservice industry pose challenges. Investors should closely monitor the company's ability to generate positive free cash flow and manage its debt obligations to determine if a more bullish stance is warranted.
Business Strategy & Overview
Karat Packaging operates as a manufacturer and distributor of single-use disposable products, catering primarily to the restaurant and foodservice industries. Its product range encompasses a diverse array of items, including food containers, tableware, cups, cutlery, and other related supplies. The company differentiates itself through its Karat Earth brand, which focuses on eco-friendly alternatives made from biopolymers and compostable materials, aligning with the growing consumer demand for sustainable packaging solutions. This focus on sustainability could provide a competitive edge as environmental regulations become more stringent and consumer preferences shift towards greener products.
The company's revenue generation is primarily driven by sales to domestic and regional distributors, restaurant chains, retail establishments, and online customers. Karat Packaging also provides value-added services such as new product development, design, printing, and logistics, which enhance customer relationships and contribute to revenue diversification. This integrated approach, from manufacturing to distribution and service, allows the company to capture a larger share of the value chain and potentially improve profitability.
Karat Packaging's strategic positioning involves expanding its product portfolio and customer base while maintaining a focus on cost efficiency. The company actively seeks to introduce new products and materials to meet evolving market demands and regulatory requirements. Geographic expansion, both domestically and internationally, is another key element of its growth strategy. By diversifying its customer base and geographic reach, Karat Packaging aims to reduce its reliance on any single market or customer, mitigating potential risks associated with economic downturns or changes in consumer preferences.
The foodservice packaging industry is characterized by intense competition, with numerous players vying for market share. Karat Packaging competes with both large, established companies and smaller, regional players. To succeed in this competitive environment, the company must maintain a strong focus on product innovation, cost control, and customer service. The ability to adapt to changing market conditions and regulatory requirements is also crucial for long-term success. The company's investment in its Karat Earth brand and its focus on sustainable packaging solutions could provide a significant competitive advantage in the coming years.
Execution Benchmarks audit
Revenue Growth
YOY expansion rate
10.6%
Sector: 1.8%
+505% VS SCTR
Economic Moat Analysis
Karat Packaging's economic moat is assessed as None. While the company demonstrates strong profitability metrics compared to the sector, these advantages do not appear to be sustainable over the long term due to the lack of significant barriers to entry in the foodservice packaging industry. The company's products, while essential for its customers, are largely commoditized, and switching costs are relatively low.
The company's Karat Earth brand, which focuses on sustainable packaging solutions, could potentially create a narrow moat if it gains significant market share and brand recognition. However, the market for sustainable packaging is still relatively nascent, and competition is increasing as more companies enter the space. The ability to establish a strong brand reputation and differentiate its products based on quality, performance, and environmental impact will be crucial for Karat Packaging to develop a sustainable competitive advantage in this area.
Karat Packaging does not appear to benefit from significant network effects. The value of its products and services does not increase as more customers use them. Similarly, the company does not possess significant intangible assets, such as patents or proprietary technology, that would provide a durable competitive advantage. While the company has developed expertise in manufacturing and distribution, these capabilities are not unique and can be replicated by competitors.
The company's cost advantages, as evidenced by its higher gross and operating margins compared to the sector, are likely due to efficient operations and supply chain management. However, these advantages are not insurmountable and could be eroded by rising raw material costs or increased competition. The company's ability to maintain its cost advantages will depend on its continued focus on operational efficiency and its ability to negotiate favorable terms with its suppliers.
Efficient scale is not a significant factor in the foodservice packaging industry. While larger companies may benefit from economies of scale in manufacturing and distribution, smaller companies can still compete effectively by focusing on niche markets or providing specialized products and services. Karat Packaging's size and scale do not appear to provide a significant competitive advantage over its rivals.
Financial Health & Profitability
Karat Packaging's financial health presents a mixed picture. The company has demonstrated consistent revenue growth over the past few years, with revenue increasing from $405.65 million in FY2023 to $467.74 million in FY2025. This represents a compound annual growth rate (CAGR) of approximately 7.4%, which is significantly higher than the sector average of 1.5%. This growth is a positive indicator of the company's ability to expand its market share and attract new customers.
The company's profitability metrics are also strong compared to the sector. Its gross margin of 38.0%, operating margin of 9.4%, and net margin of 7.5% are all significantly higher than the sector averages of 30.2%, 6.0%, and 3.0%, respectively. This indicates that Karat Packaging is able to generate higher profits from its sales than its competitors. The company's return on equity (ROE) of 22.1% is also significantly higher than the sector average of 2.7%, suggesting that it is effectively utilizing its equity to generate profits.
However, the company's free cash flow (FCF) is a cause for concern. The company reported negative FCF of -$4.28 million for the trailing twelve months (TTM). This indicates that the company is not generating enough cash from its operations to cover its capital expenditures and other cash outflows. The lack of FCF generation could limit the company's ability to invest in future growth opportunities or return capital to shareholders. The quarterly financial history does not provide FCF data, making it difficult to assess the trend in FCF generation.
The company's balance sheet is relatively leveraged, with total debt of $45.13 million and total cash of $24.02 million. The company's debt-to-equity (D/E) ratio of 83.00 is significantly higher than the sector average of 40.00, indicating that it relies more heavily on debt financing than its peers. While the company's current ratio of 2.30 suggests that it has sufficient liquidity to meet its short-term obligations, the high level of debt could increase its financial risk, especially in a rising interest rate environment.
Analyzing the quarterly financial history, the gross margin has fluctuated between 34.5% and 39.8%, while the operating margin has ranged from 6.9% to 13.3%. These fluctuations could be due to changes in raw material costs, product mix, or operating expenses. The company's ability to maintain stable margins will be crucial for its long-term profitability.
Valuation Assessment
Karat Packaging's valuation presents a mixed picture. The company's price-to-earnings (P/E) ratio of 17.2x is lower than the sector average of 26.1x, suggesting that the stock may be undervalued relative to its peers. Similarly, its enterprise value-to-EBITDA (EV/EBITDA) ratio of 3.3x is significantly lower than the sector average of 5.2x, further supporting the argument that the stock is undervalued.
However, the company's negative free cash flow (FCF) complicates the valuation assessment. Traditional valuation metrics, such as the FCF yield, cannot be used when FCF is negative. This makes it more difficult to determine the intrinsic value of the stock based on its cash flow generation potential. Investors should carefully consider the reasons for the negative FCF and assess whether it is a temporary issue or a more persistent problem.
The company's strong revenue growth and profitability metrics compared to the sector could justify a higher valuation multiple. However, the lack of a clearly defined economic moat and the potential risks associated with raw material costs and regulatory changes warrant a more conservative valuation approach. The company's high debt levels also add to the risk profile and could limit its ability to invest in future growth opportunities.
A discounted cash flow (DCF) analysis, which is not possible with the provided data due to the lack of FCF projections, would be a more appropriate valuation method for Karat Packaging. However, without reliable FCF forecasts, it is difficult to determine a precise fair value for the stock. Investors should consider the company's growth prospects, profitability, and risk factors when assessing its valuation.
Given the mixed valuation signals, the current Hold rating appears justified. The stock may be undervalued based on its P/E and EV/EBITDA ratios, but the negative FCF and high debt levels warrant caution. Investors should closely monitor the company's financial performance and assess its ability to generate positive FCF before considering a more bullish stance.
Risk & Uncertainty
Karat Packaging faces several specific risks that could impact its financial performance and valuation. One of the primary risks is the volatility of raw material costs, particularly for plastic, paper, and biopolymers. Fluctuations in these costs can significantly impact the company's gross margins and profitability. The company attempts to mitigate this risk through hedging strategies and long-term supply contracts, but these measures may not fully protect it from adverse price movements.
Regulatory changes related to single-use plastics and packaging materials pose another significant risk. As governments around the world implement stricter regulations to reduce plastic waste and promote sustainable packaging, Karat Packaging may face increased costs associated with compliance and the development of alternative materials. The company's Karat Earth brand, which focuses on eco-friendly products, could help mitigate this risk, but the company must continue to innovate and adapt to evolving regulatory requirements.
Competition within the foodservice packaging industry is intense, with numerous players vying for market share. This competition could lead to price wars and reduced profitability for Karat Packaging. The company must differentiate itself through product innovation, customer service, and cost efficiency to maintain its competitive position. The company's ability to successfully compete with larger, more established companies will be crucial for its long-term success.
Customer concentration is another potential risk. While the company serves a diverse customer base, a significant portion of its revenue may be derived from a small number of large customers. The loss of one or more of these key customers could have a material adverse impact on the company's financial performance. The company should continue to diversify its customer base to reduce this risk.
The company's relatively high debt levels also pose a risk. The company's debt-to-equity ratio of 83.00 is significantly higher than the sector average, which could increase its financial risk, especially in a rising interest rate environment. The company's ability to service its debt obligations will depend on its ability to generate sufficient cash flow. Failure to meet its debt obligations could lead to financial distress.
Bulls Say / Bears Say
The Bull Case
BULL VIEWKarat Packaging's focus on sustainable packaging through its Karat Earth brand positions it favorably to capitalize on growing consumer demand and stricter environmental regulations, leading to increased market share and revenue growth.
BULL VIEWThe company's strong profitability metrics, including higher gross and operating margins compared to the sector, demonstrate efficient operations and effective cost management, resulting in superior earnings and shareholder returns.
BULL VIEWKarat Packaging's lower P/E and EV/EBITDA ratios relative to its peers suggest that the stock is undervalued, offering a compelling investment opportunity with significant upside potential as the market recognizes its true value.
The Bear Case
BEAR VIEWKarat Packaging's negative free cash flow raises concerns about its ability to fund future growth and manage its debt obligations, potentially leading to financial distress and limiting its long-term investment prospects.
BEAR VIEWThe company's lack of a clearly defined economic moat and the commoditized nature of its products make it vulnerable to intense competition and price wars, eroding its profitability and limiting its ability to sustain its competitive advantage.
BEAR VIEWKarat Packaging's high debt-to-equity ratio increases its financial risk, making it more susceptible to adverse economic conditions and rising interest rates, potentially impacting its ability to service its debt and invest in future growth initiatives.
About the Author
Marques Blank
Founder & Chief Investment Officer, Blank Capital
Marques brings 15 years of institutional finance and investing experience, having overseen financial planning for a $1.6B defense business unit. He developed the proprietary 6-factor quantitative model used to score KRT and 4,400+ other equities.
Karat Packaging Inc. exhibits a 46% valuation premium relative to institutional benchmarks. This represents a potential valuation overextension based on current multiples.
Return on Assets
Efficiency of asset utilization
12.1%
Sector: 0.6%
Gross Margin
Pricing power and cost efficiency
38.0%
Sector: 29.8%
Operating Margin
Core business profitability
9.4%
Sector: 6.0%
Net Margin
Bottom-line profitability
7.5%
Sector: 3.0%
Factor Methodology
The Quality factor evaluates the persistence and magnitude of cash flows. Companies with scores >70 exhibit superior competitive moats and financial resilience through economic cycles.
Sector Avg Yield0.49%
Yield Delta+1316%
Income Projection audit
A $10,000 investment would generate approximately $694 annually in dividends at the current trailing rate.
