$KN short DD on Knowles Corporation, I haven’t reached a conclusion about this stock, and would appreciate input. via /r/wallstreetbets #stocks #wallstreetbets #investing


$KN short DD on Knowles Corporation, I haven’t reached a conclusion about this stock, and would appreciate input.

I was looking through my AI stock picker this morning, and Knowles Corp (KN) caught my eye. This DD is my personal research to see if it is a worthwhile investment for me. I pull my research from multiple other sources and my own intuition. Everything is my own writing unless quoted. I will reference sources for particular sections.

This is all my research has turned up so far (I’m having trouble going further with this as there’s very little information out there), I am seeking further information from those who are good at analysing finances – please comment if you have the time to take a quick look at this. Currently I feel inconclusive about this, but can see a case for value investing

Fridays summary: ‘KNOWLES CORP ranked better than it’s peers today. It delivered +0.69% to close at 21.82. It’s recent 5 day performance has been +0.65%, -0.69%, -0.55%, -0.27% and -0.86%. (AI generated).

What is Knowles Corporation (KN)? Knowles is a communications/components stock. ‘Knowles Corp is a provider of advanced micro-acoustic, audio processing, and precision device solutions. It primarily serves the mobile consumer electronics, communications, medical, defense, aerospace, and industrial markets. The business activities of the group are functioned through Audio and PD segments. The Audio segment designs and manufactures innovative audio products, including microphones and balanced armature speakers, audio processors, and software and algorithms used in applications that serve the mobile, ear, and IoT markets, Whereas the PD group specializes in the design and delivery of highly engineered capacitors and RF devices for technically demanding applications.’ (Nasdaq)

Its market cap is $2 billion, Friday’s low was $21.64 and the high was $21.91. It closed at $21.90. (Yahoo) (Barrons) (Nasdaq)

It has had attention drawn to it recently due to ‘substantial price movement’ on the NYSE over the last few months. It’s 52 week high was $23.81, it’s low was $18.20.

Recent earnings Knowles released earnings on Tuesday, February 8ths. It released $0.48 EPS for the quarter, which beat Thomson Reuters and Zacks consensus estimate of $0.44 (by $0.04). We can see this reflected in the one month chart (https://i.lensdump.com/i/rvWcbQ.png). Earnings a year ago were $0.41 per share.

This represents an earnings surprise of 9.09%. A quarter ago, $0.39 per share was expected, but KN produced earnings of $0.45 per share, delivering a surprise of 15.38%.

It posted revenues of $234.3 million for Q4 2021, year ago revenues were $243.2 million. KN has topped consensus revenue estimates four times over the last four quarters.

‘Several equities research analysts recently issued reports on the company. Colliers Securities raised Knowles from a neutral rating to a buy rating and set a $25.50 price target on the stock in a research report on Thursday, February 10th. StockNews.com raised Knowles from a hold rating to a buy rating in a research report on Friday, February 18th. Finally, Zacks Investment Research raised Knowles from a hold rating to a strong-buy rating and set a $27.00 target price on the stock in a research report on Friday, February 11th. Two investment analysts have rated the stock with a hold rating, three have assigned a buy rating and one has issued a strong buy rating to the stock. According to data from MarketBeat, the company has an average rating of Buy and a consensus price target of $24.30. (marketbeat)

Q1 2022 guidance: ‘$KN updates Q1 2022 guidance to $0.290-$0.310 EPS and revenue guidance to $197 million-$203 million.’ (marketbeat)

(entrepreneur) (marketbeat)

The company has underperformed the market so far this year, so what’s next?

  • Earnings vs Savings Rate: KN’s earnings are forecast to decline over the next 3 years (-3.4% per year).

  • Earnings vs Market: KN’s earnings are forecast to decline over the next 3 years (-3.4% per year).

  • High Growth Earnings: KN’s earnings are forecast to decline over the next 3 years.

  • Revenue vs Market: KN’s revenue (6.1% per year) is forecast to grow slower than the US market (8.8% per year).

  • High Growth Revenue: KN’s revenue (6.1% per year) is forecast to grow slower than 20% per year.

This doesn’t look great. However, the recent earnings performance has been very good, and I don’t put too much faith in forecasts.

However:

  • Quality Earnings: KN has high quality earnings.

  • Growing Profit Margin: KN’s current net profit margins (17.3%) are higher than last year (0.4%).’

  • Earnings Trend: KN’s earnings have grown significantly by 30% per year over the past 5 years.

  • Accelerating Growth: KN’s earnings growth over the past year (5079.3%) exceeds its 5-year average (30% per year).

  • Earnings vs Industry: KN earnings growth over the past year (5079.3%) exceeded the Electronic industry 49.5%.

  • Short Term Liabilities: KN’s short term assets ($380.3M) exceed its short term liabilities ($166.2M).

  • Long Term Liabilities: KN’s short term assets ($380.3M) exceed its long term liabilities ($105.9M).

(Data from simplywallst)

What is Knowles’s price target? ‘The average price target for Knowles is $25.88. This is based on 4 Wall Streets Analysts 12-month price targets, issued in the past 3 months. The highest analyst price target is $30.00 ,the lowest forecast is $22.00. The average price target represents 18.61% Increase from the current price of $21.82.’ (tipranks)

What do analysts say about Knowles? ‘Knowles’s analyst rating consensus is a ‘Strong Buy. This is based on the ratings of 4 Wall Streets Analysts.’ (tipranks)

What products does Knowles make and what’s their history? * Founded in 1946 by Hugh Knowles. * Now one of the market leaders in producing audio components and solutions used in mobile phones, smart speakers, hearables, IoT and more. * Developed the first miniature microphone and balanced armature receiver for hearing aids in 1954, a breakthrough at the time. * Introduced the first micro-electro-mechanical systems (MEMS) microphone in 2002.Paved the way for hands-free calling, voice assistance, and voice control. * First digital microphone with ultrasonic bandwidth in 2014. ‘Brought us touchless gesture recognition, phone-to-phone data transmission, pen input compatibility for handsets and tablets, plus 3D positioning input.’ * In the 1980’s they added improved balanced armatures to IEMs (in-ear monitors) used by professional musicians. Today KN is a supplier of these balanced armatures to many leading manufactures of true wireless earbuds and IEM’s. This caused the True Wireless Stereo (TwS) earphone space to boom quickly. KN is the world’s best known balanced armature producer. * “That’s one small step for man, one giant leap for mankind.” was captured by a Knowles microphone, chosen by NASA for its ‘lightweight design, durability and acoustic sensitivity’. * Used in the Mars Perseverance rover ‘The rover captured the first recorded sound of the Martian wind passing over the rocky landscape of the planet.’ * Has been selling around two billion microphones each year to OEMs.

  • ‘Increased demand for smart speakers, smart home products, and TWS earphones will continue to fuel the demand for MEMS microphones in the coming years.’
  • KN is looking to specialise in voice user interfaces.
  • ‘For example, Knowles has partnered with Fluent.AI to deliver fully offline and app-free AI-powered voice control for TWS earbuds and other hearable products.’
  • ‘Knowles re-focused its engineering process in 2021 to focus on the delivery of flexible, scalable solutions for OEMs, ODMs and system integrators. Last year, the company launched several integrated solution packages, which include multiple components and software for growing vertical markets like automobiles, smart appliances, Bluetooth, True Wireless Stereo (TWS) headphones and machine learning. Knowles has even started to embrace a broader partnership approach to accelerate innovation of voice and emerging audio technologies.’
  • ‘Knowles Corporation has grown to supply the mobile consumer electronics, communications, medical, military, aerospace and industrial markets.’

(forbes)

Recent News:

  • ‘Knowles Introduces New Balanced Armature Receiver for Over-The-Counter Hearing Aid Market’ ‘a market leader and global provider of advanced micro-acoustic microphones, speakers, audio solutions, high performance capacitors and RF products, today announced the RAQ, a new medium-power balanced armature receiver developed for high volume hearing health and TWS products. This full-range balanced armature receiver’s small size and high output delivers up to 116dB Sound Pressure Level (SPL) at 500Hz, making it optimally positioned to meet the performance requirements for both hearing health and True Wireless Sound (TWS) products’.(businesswire)

  • ‘Knowles (KN), Fluent.ai to Offer Voice-Controlled TWS Earbuds’ ‘KN recently announced that it has partnered with speech recognition software provider Fluent.ai to unveil and demonstrate next-gen voice-controlled True Wireless Stereo (TWS) earbuds. The offering will be showcased at the Consumer Electronics Show (CES) 2022 event.’ (Yahoo)

Growth Drivers: * Voice-powered interactions are emerging as a crucial feature as consumers are wanting to engage with technology through spoken commands across mobile, ear and IoT platforms (eg Alexa). This has led to many products utilising spoken voice commands such as mobile phones, headsets, smart speakers and household appliances. * Knowles has special capabilities in this area; those being in acoustics, digital signal processing and algorithms. This will allow it to cater to these demands.** The company recently acquired Audience**, which allowed it to gain digital signal processing and algorithm capabilities.

  • ‘Strong business focus, disciplined capital management, and continuous R&D (research & development) initiatives have helped Knowles to command a leading market position in MEMS microphones, balanced armature speakers, edge processors, high-performance capacitors, and radiofrequency filtering solutions. MEMS microphones are the smallest of their kind with the highest signal-to-noise ratio at the lowest power, while the balanced armature speakers offer the greatest output at the lowest power.’
  • ‘Proprietary manufacturing techniques and global scale of operations have facilitated the company to fine-tune its business with the evolving customer demands and invest in high-value solutions. The transformation from an acoustic component supplier to an audio solutions provider has enabled the company to migrate to higher-value solutions and increase content per device. This, in turn, has empowered it to capitalize on the positive macro trends in audio and edge processing solutions.’ (Zacks)

  • ‘Knowles boasts integrated design and manufacturing scale of operations. The company has a unique ability to balance and shift between full and semi-automation to optimize the efficiency of the operations and reduce operating expenses. For products that were introduced more than 18 months ago, Knowles strives to offset expected price erosion through bill of material cost reductions, yield improvements, equipment efficiency, and movement to lower-cost manufacturing locations.’ (Zacks)

(Zacks)

This is a high risk play ‘However, with a negative profit growth of -10% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Knowles. This certainty tips the risk-return scale towards higher risk.’ (simplywallst)

Recent insider trades 23rd Feb * $169,342.48 of shares sold by Niew Jeffrey (President & CEO)
* $16,260.00 of shares sold by Bastarrica Air A. Jr. (Vice President, Controller)
* $37,376.32 of shares sold by Giesecke Daniel J. (Senior Vice President & COO) * $29,896.72 of shares sold by Cabrera Raymond D. (SVP, HR & Chief Admin. Officer) All above were due to exercise/tax liability.

This is all my research has turned up so far (I’m having trouble going further with this as there’s very little information out there), I am seeking further information from those who are good at analysing finances – please comment if you have the time to take a quick look at this. Currently I feel inconclusive about this, but can see a case for value investing

Submitted February 27, 2022 at 10:16AM by commodoregoat
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