Knowles (KN) Margin Recovery Challenges Bearish Profitability Narratives After FY 2025 Results

Knowles (KN) has wrapped up FY 2025 with fourth quarter revenue of US$162.2 million and basic EPS of US$0.30, rounding out a year in which trailing twelve month EPS reached US$0.59 on revenue of US$593.2 million. Over the past few quarters, the company has seen revenue move from US$142.5 million and EPS of US$0.12 in Q4 2024 to US$132.2 million with essentially flat EPS in Q1 2025, before climbing to US$145.9 million and US$0.09 in Q2 and US$152.9 million and US$0.21 in Q3, giving investors a clearer run rate into the latest print. With earnings up 117.5% over the last year and net profit margin sitting at 8.6% compared with 4.2% previously, these results put profitability firmly in focus for anyone tracking how the business is converting sales into bottom line returns.

See our full analysis for Knowles.

With the numbers on the table, the next step is to see how this earnings profile lines up with the widely shared narratives around Knowles, highlighting where the latest results support the story and where they start to push back against it.

See what the community is saying about Knowles

Net income nearly doubles on a full year view

• On a trailing 12 month basis, net income excluding extra items is US$50.9 million, compared with US$23.4 million a year earlier, alongside revenue of US$593.2 million versus US$553.5 million over the same periods.
• Bullish investors highlight that this earnings rise of 117.5% and the move in net margin from 4.2% to 8.6% align with their view that medtech, industrial and defense demand plus new product lines can support stronger profitability, although:
  • Q1 2025 net income excluding extra items was US$24.0 million on US$552.4 million of trailing revenue, so the latest US$50.9 million figure represents a sizeable step up within just a few quarters.
  • Quarterly net income excluding extra items also moved from US$10.4 million in Q4 2024 to US$25.5 million in Q4 2025, which bullish narratives see as consistent with better factory utilization and margin focus.

If you want to see how those Q4 profits compare with the most optimistic long term views, check out the detailed bull case many investors are using as a reference point: 🐂 Knowles Bull Case

Quarterly EPS swings contrast with bearish margin worries

• Across FY 2025, basic EPS moved from a small loss of US$0.00 in Q1 2025 to US$0.09 in Q2, US$0.21 in Q3 and US$0.30 in Q4, while trailing 12 month EPS rose from US$0.27 in Q1 2025 to US$0.59 by Q4.
• Bears often focus on pressure from commoditization and factory inefficiencies, yet the reported trend in EPS and net income excluding extra items challenges a simple margin squeeze story in a few ways:
  • Q4 2025 net income excluding extra items of US$25.5 million is up from US$18.0 million in Q3 and US$7.8 million in Q2, which sits awkwardly with concerns that profitability might be consistently capped by rising costs.
  • Even with earnings from discontinued operations swinging between a US$1.6 million loss in Q1 2025 and a US$4.5 million loss in Q4 2025, trailing earnings still reached US$50.9 million, showing that the core lines have supported EPS despite these headwinds.

Skeptical views lean on those margin concerns, so it helps to see how they reconcile with the reported swings in EPS and profitability: 🐻 Knowles Bear Case

Premium P/E puts pressure on 29.9% earnings growth forecasts

• At a share price of US$26.91 and trailing 12 month EPS of US$0.59, Knowles trades on a P/E of 44.9x, which is above the US Electronic industry average of 27.8x and a peer average of 37.7x, and also above a DCF fair value of US$18.74 per share.
• Analysts who are bullish on the stock point to forecast earnings growth of about 29.9% per year over the next 3 years to justify that premium, but the current numbers set a high bar:
  • The move from US$23.4 million to US$50.9 million in trailing net income excluding extra items provides a strong base, yet any slowdown from this pace would leave the 44.9x P/E more exposed compared with industry and peers.
  • With revenue on a trailing basis at US$593.2 million versus US$553.5 million a year earlier, the improved 8.6% net margin is contributing more than top line growth, which matters if future earnings growth needs to lean on further margin expansion.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Knowles on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

See the numbers differently, or read the story another way, and you can quickly turn that view into your own narrative in just a few minutes, Do it your way.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Knowles.

See What Else Is Out There

For all the progress on margins, the combination of a high 44.9x P/E, a premium to peers, and reliance on margin gains keeps valuation risk in focus.

If that premium price tag makes you cautious, this is a good moment to scan our 51 high quality undervalued stocks and see which companies better match your risk reward comfort zone.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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