Breaking Down Knowles Corporation (KN) Financial Health: Key Insights for Investors

You're looking at Knowles Corporation (KN) and wondering if the Q3 momentum can overcome a stretched valuation, and the quick answer is that their strategic pivot is defintely showing results, but you need to be realistic about the near-term price action. Knowles just posted a solid third quarter for 2025, delivering $153 million in revenue, a 7% jump year-over-year, alongside a non-GAAP diluted earnings per share (EPS) of $0.33, which is a 22% increase. That's strong execution. The key driver is their Precision Devices segment, which saw a 12% revenue increase, proving the focus on high-value markets like medtech and defense is working, plus they generated $29 million in net cash from operations and used it to reduce debt and buy back $20 million in shares. Still, the market is pricing in a lot of optimism, with the stock trading at 50.5 times earnings, which is its price-to-earnings (P/E) ratio, significantly higher than the industry average, so you have to weigh that fundamental strength against the near-term risk of a correction.

Revenue Analysis

You need a clear picture of where Knowles Corporation (KN) is making its money, and the key takeaway is a pivot: the company is successfully transitioning into a focused industrial technology player, evidenced by a trailing twelve-month (TTM) revenue of $573.50 million ending September 30, 2025, with a solid 4.23% year-over-year growth. That's a defintely a healthy sign of stability following a major strategic shift.

The primary revenue streams now flow from two core segments, a direct result of divesting the Consumer MEMS Microphones business in late 2024. This move has sharpened the focus on high-margin, specialized electronic components. The products fueling this revenue include advanced medtech microphones, balanced armature speakers, capacitors, and radio frequency (RF) filters, serving the MedTech, Specialty Audio, and Precision Devices markets.

The year-over-year revenue growth rate has been accelerating in 2025, moving from a slight decline in Q1 to stronger sequential and annual increases. For the third quarter of 2025, Knowles Corporation reported revenues of $152.9 million, marking a 7% increase from the same period in 2024. Looking ahead, management expects this momentum to continue, guiding for Q4 2025 revenues to be between $151 million and $161 million, with an anticipated 9% year-over-year growth at the midpoint.

Breaking down the business segments shows where the growth is concentrated. The MedTech & Specialty Audio (MSA) segment and the Precision Devices (PD) segment contribute roughly equally, but with different growth trajectories. In Q2 2025, the PD segment was the largest contributor, but MSA is growing faster. Here's the quick math on the Q2 2025 contribution:

• Precision Devices (PD): $79 million in revenue, showing 6% year-over-year growth.
• MedTech & Specialty Audio (MSA): $67 million in revenue, with a stronger 10% year-over-year increase.

The significant change in revenue streams is the strategic exit from the volatile consumer market. This allows the company to concentrate resources on end markets like medtech and defense, which are historically more resilient to macroeconomic shifts. The MSA segment's growth is driven by increased demand in the Hearing Health market, which has proven resilient even during past economic downturns. This strategic pivot is a crucial factor to consider when evaluating the company's financial health, as detailed further in Breaking Down Knowles Corporation (KN) Financial Health: Key Insights for Investors.

To be fair, the PD segment did see a slight revenue decline of 2.4% year-over-year in Q1 2025, but it rebounded with 6% growth in Q2, demonstrating improved operational execution and a reduction in distributor inventory levels. This suggests the segment is regaining its footing after facing some production challenges earlier in the year.

Next step: Dig into the gross margins for each segment to confirm if the MSA segment's strong growth is translating into superior profitability.

Profitability Metrics

You need to know if Knowles Corporation (KN) is translating its specialty-component revenue into real profit, especially as the industry heats up. The direct takeaway is that KN's margins are robustly above the general electronic components industry average, signaling strong pricing power and operational control, particularly in their high-value segments.

In the third quarter of 2025, Knowles Corporation reported revenues of $152.9 million. The key is how much of that revenue they keep after costs. Here's the quick math on their GAAP profitability for Q3 2025, which ended September 30, 2025:

• Gross Profit Margin: 45.7%
• Operating Profit Margin: Approximately 17.07%
• Net Profit Margin: Approximately 11.38%

That 45.7% Gross Margin, derived from a Gross Profit of $69.9 million, is defintely a bright spot. It shows their custom-engineered solutions-like those for medtech and defense-command a premium and keep their cost of goods sold (COGS) in check. For context, the general Electronic Components industry average Gross Profit Margin is around 33.8%. KN is outperforming the average by a significant margin.

Trends in Profitability and Operational Efficiency

The trend over the past year is where the real story is. Knowles Corporation has made a massive leap toward sustainable profitability. For the nine months of 2025, the company reported a Net Income of $23.2 million, a dramatic turnaround from the $256.3 million net loss reported in the prior year's period.

This isn't a fluke; it's a result of strategic focus. The company expects full-year organic revenue growth of 6% for 2025, and management is guiding for non-GAAP gross margins to be Above 50% for the full year. That upward trajectory suggests they are successfully shifting their product mix toward higher-margin offerings, like their Precision Devices segment, and managing production costs well.

The Operating Profit Margin of 17.07% (based on $26.1 million in Operating Profit) is also impressive when compared to the general electronic components sector's average Net Profit Margin of just 3.1%. This gap highlights their superior control over selling, general, and administrative (SG&A) expenses.

To be fair, the semiconductor and active component space is broad, but when you compare KN's 45.7% Gross Margin to the 45% average for the pure Active Components segment, Knowles is right in line with the top-tier, high-tech manufacturers. This is a good sign for their Mission Statement, Vision, & Core Values of Knowles Corporation (KN), which emphasizes high-performance solutions.

Here's a snapshot of how Knowles Corporation stacks up against the broader industry average:

Operational Efficiency: Clear Actions

Operational efficiency isn't just about the top-line margins; it's also about how management handles the balance sheet. In Q3 2025 alone, the company repurchased $20 million in shares and reduced debt by $15 million. This shows strong cash generation and a disciplined capital allocation strategy that directly benefits shareholders. They're not just making money; they're putting it to work for you.

Debt vs. Equity Structure

You want to know how Knowles Corporation (KN) is funding its growth, and the short answer is: mostly through equity and strong operational cash flow, not debt. Their balance sheet is defintely conservative, showing a clear preference for financial stability over aggressive leverage, which is a good sign in the current economic climate.

As of late 2025, Knowles Corporation maintains a very manageable debt load. The company's Long-Term Debt stood at just $104.0 million as of September 30, 2025. For context, total debt was approximately $210.9 million as of June 2025, with a substantial Stockholders' Equity of roughly $751.8 million in the same period.

• Debt is low; equity is high.

Here's the quick math on their leverage posture:

The Debt-to-Equity Advantage

The key metric for leverage is the Debt-to-Equity (D/E) ratio, which tells you how much debt a company uses to finance its assets relative to the value of its shareholders' equity. Knowles Corporation's D/E ratio recently sat at about 0.14.

To be fair, the industry average for Communication Equipment manufacturers is around 0.47 as of November 2025. This means Knowles Corporation is significantly less leveraged than its peers. A ratio this low suggests two things: a very strong balance sheet that can weather a downturn, and also, perhaps, that the company isn't aggressively using cheap debt to amplify returns, which is a trade-off. They are prioritizing safety.

Financing Strategy and Capital Allocation

Knowles Corporation's recent actions show a clear capital allocation strategy focused on reducing debt and returning capital to shareholders. In the third quarter of 2025 alone, the company reduced its debt balance by $15 million. Plus, they repurchased $20 million in shares during that quarter, signaling management's confidence in the stock being undervalued and a commitment to enhancing shareholder value.

This balance-paying down debt while simultaneously executing a share buyback program-demonstrates a healthy cash flow from operations, which was $29.1 million in Q3 2025. They are generating enough cash internally to fund their growth, reduce leverage, and reward investors without needing to issue new debt or dilute equity. This is a sign of a mature, well-managed business. For a deeper dive into the company's overall financial health, check out Breaking Down Knowles Corporation (KN) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You want to know if Knowles Corporation (KN) has the cash on hand to cover its short-term bills, and honestly, the numbers for the 2025 fiscal year look solid. Liquidity, which is just a fancy term for how easily a company can turn assets into cash, is strong, especially after the strategic divestiture of the Consumer MEMS Microphone business in late 2024.

The company's current ratio, which compares all current assets to current liabilities, stands at a healthy 1.90 as of late 2025. This means Knowles Corporation (KN) holds nearly two dollars in short-term assets for every one dollar of debt coming due in the next year. That's a defintely comfortable margin.

The quick ratio (or acid-test ratio), which is a stricter test that excludes inventory-since that can take time to sell-is also robust at 1.19. This tells us the company can cover its immediate obligations with just its most liquid assets, like cash and accounts receivable. That's financial flexibility you can trust.

Here's the quick math on their short-term position, based on the most recent data:

• Current Ratio: 1.90 (Strong; above the 1.0 benchmark)
• Quick Ratio: 1.19 (Excellent; above the 1.0 benchmark)

Analysis of working capital trends shows a slight contraction, with a change in working capital of -$15.5 million for the trailing twelve months ending September 2025. This isn't a red flag, but rather a sign of efficient capital management and a focus on reducing net working capital, which was highlighted in the Q3 2025 earnings call as a driver for strong cash from operations. Essentially, they are moving cash out of things like inventory and into more productive uses.

Cash Flow Statement Overview

The real story of a company's financial health is in its cash flow statement. Knowles Corporation (KN) is generating significant cash from its core business, which is the most important thing. The cash flow statements for the trailing twelve months ending September 2025 show a clear picture of operations funding strategic moves and capital returns.

Cash from operating activities (CFO), the cash generated from the day-to-day business of selling specialty components, was a strong $101.9 million. This is the engine of the business, and it's running well. Cash from investing activities was a net inflow of $32 million for the same period, which is unusual for a growth-focused tech company but reflects the strategic shift following the divestiture. Cash from financing activities was a significant outflow of -$133.4 million. This negative number is actually a positive signal for investors.

The financing outflow was driven by two clear, shareholder-friendly actions: reducing debt and repurchasing shares. For example, in Q3 2025 alone, the company repurchased $20 million in shares and reduced debt by $15 million. This capital allocation strategy shows management is confident in the company's future cash generation.

Here is a snapshot of the TTM cash flow trends as of late 2025:

There are no immediate liquidity concerns. The company's liquidity position is a clear strength, with healthy ratios and a cash flow profile that supports both operational needs and capital return to shareholders. The conservative net debt leverage ratio of 0.6x as of Q3 2025 also provides ample financial flexibility for future strategic investments. For a deeper dive into who is buying and why, check out Exploring Knowles Corporation (KN) Investor Profile: Who's Buying and Why?

Valuation Analysis

You're looking at Knowles Corporation (KN) and asking the crucial question: Is the stock priced fairly, or are we looking at a hidden opportunity or a potential bubble? As of late 2025, the picture is nuanced, suggesting the market is pricing in significant future growth, but analysts still see a clear path for upside.

The short answer is that Knowles Corporation (KN) appears expensive on trailing earnings but looks much more reasonable when you factor in future growth. This is a classic growth-stock scenario. The stock's current price of around $21.34 (as of November 2025) reflects a belief in the company's shift toward high-margin Medtech & Specialty Audio and Precision Devices segments.

Here's the quick math on the key valuation multiples for the 2025 fiscal year:

• Trailing Price-to-Earnings (P/E): A high 53.29 times. This is based on the last twelve months of earnings, which were likely suppressed.
• Forward P/E: A much more palatable 18.16 times. This is what matters-the market expects a big jump in earnings per share (EPS).
• Price-to-Book (P/B): 2.48 times. This is a decent multiple for a technology company, showing the stock is trading at less than 2.5 times its net asset value.

The Enterprise Value-to-EBITDA (EV/EBITDA) ratio is sitting at 17.73. This multiple is a clean way to compare the total value of the company (Enterprise Value) to its operating cash flow (EBITDA), ignoring capital structure. Honestly, an EV/EBITDA of 17.73 is on the higher end for the broader S&P 500, but for a specialized semiconductor and component maker, it signals that investors are willing to pay a premium for the company's strong gross margins and market position in areas like hearing health and defense.

What this estimate hides is the company's non-dividend policy. Knowles Corporation (KN) does not currently pay a dividend, meaning both the dividend yield and payout ratio are 0.00%. Your return will come purely from capital appreciation, not income, so the growth story needs to deliver.

The stock has defintely shown positive momentum, rising by 14.61% over the last 12 months leading into November 2025. This is a solid gain, especially considering the 52-week range, where the stock climbed from a low of $12.19 to a high of $24.54.

Wall Street analysts are leaning toward optimism. The consensus rating for Knowles Corporation (KN) is a Moderate Buy. The average 12-month price target is $27.00, which implies a forecasted upside of 26.79% from the current price. This suggests that the market's current valuation of 18.16x forward P/E is seen as a fair entry point for investors who believe the company will execute on its strategic vision. If you want to dig deeper into their long-term plan, you can review the Mission Statement, Vision, & Core Values of Knowles Corporation (KN).

Here is a snapshot of the key metrics that drive the valuation discussion:

Your next step should be to look at the competitive landscape and see if this 18.16x forward P/E is a discount or a premium compared to peers like Skyworks Solutions or Qorvo, which are also exposed to the mobile and specialty component markets.

Risk Factors

You're looking at Knowles Corporation (KN) because the strategic shift into MedTech and Specialty Audio is compelling, but you need to see the potholes before you commit capital. The direct takeaway is this: Knowles' biggest near-term risks are execution failures in scaling new production and a concentration of revenue in a handful of customers, which could quickly derail the strong growth projected for the second half of 2025.

Here's the quick math on the external risks: Geopolitical headwinds, specifically tariffs, are not a major financial threat. The company estimates that less than 5% of revenue and only 3% of cost of goods sold are exposed to current tariffs. They've managed this by using a proximity manufacturing strategy and, honestly, by having the pricing power to pass those costs onto customers in their high-value markets like MedTech and Defense. That's smart business.

Operational and Strategic Risks

The real risk is internal, centered on operational execution and customer reliance. In the MedTech & Specialty Audio (MSA) segment, we saw a recent margin decline of 280 basis points due to higher scrap costs and inefficiencies as they ramped up new production lines, like the Specialty Film product line from the Cornell Dubilier acquisition. This is a classic scaling problem, and if it persists, it will limit the margin expansion analysts expect.

The strategic risk is customer concentration, especially in the high-performing MSA segment. This segment accounted for 46% of consolidated revenues in 2024, but its top five customers made up about 81% of that segment's sales. One customer, WS Audiology A/S, represented roughly 14% of the entire company's consolidated revenue in 2024. If you lose a key design win or a major customer cuts orders, your revenue takes a serious hit.

• Operational: Higher scrap costs and ramp inefficiencies hit MSA segment margins.
• Strategic: Heavy reliance on a few customers for nearly all MSA revenue.
• Financial: A one-off loss of $14.5 million recently weighed on the net profit margin, pushing it down to 6.2%.

Mitigation and Valuation Reality Check

Knowles Corporation (KN) is defintely aware of these issues and has mitigation strategies in place. They're using their strong cash flow to manage their balance sheet, which gives them flexibility. For example, in Q2 2025, they generated a robust $36 million in cash from operations and used $30 million for share repurchases, signaling confidence and returning value.

The company's plan to combat operational risk is simple: double down on operational improvements and leverage new product lines like specialty films and inductors to broaden their total addressable market. But still, what this estimate hides is the valuation risk. The stock trades at a rich 57.6x price-to-earnings ratio, which is much higher than the US Electronic industry average of 26.9x. This means the market has already priced in a lot of that future growth, leaving little room for error if those operational improvements stumble.

For a deeper dive into the company's financial trajectory, you can read the full analysis at Breaking Down Knowles Corporation (KN) Financial Health: Key Insights for Investors.

Growth Opportunities

You want to know where Knowles Corporation (KN) is headed, and the short answer is toward specialized, high-margin markets. Management is defintely executing a clear strategy, selling off the lower-margin Consumer MEMS microphone business in late 2024 to focus squarely on two high-growth segments: Medtech & Specialty Audio and Precision Devices. This focus is translating directly into stronger financial projections for the 2025 fiscal year.

The company expects to hit a full-year organic revenue growth of 6% for 2025, which is a solid acceleration. For the fourth quarter of 2025 alone, the revenue outlook is between $151 million and $161 million, representing a 9% year-over-year growth at the midpoint. Here's the quick math: Q3 2025 Non-GAAP Earnings Per Share (EPS) was $0.33, up 22% year-over-year, and the Q4 outlook is a strong $0.33 to $0.37 per share. That's a company with accelerating earnings.

The growth isn't just a general market lift; it's driven by specific product innovations and market expansions. The Precision Devices segment is the star, expected to grow at the high end of the 6% to 8% range in 2025, fueled by defense and industrial demand. The Medtech & Specialty Audio segment is also contributing, with projected 2025 growth between 2% and 4%. They're making money where the barriers to entry are highest.

• Launched high-performance inductors in July 2025 for mission-critical RF applications.
• Unveiled the MM60 MEMS Microphone in October 2025 for AI-optimized hearing aids.
• Introduced FM2 Non-Magnetic X7R Low Loss MLCC's for medical imaging in August 2025.

The biggest near-term opportunity is the Specialty Film product line. This is a high-performance capacitor solution, and the company is actively ramping up its capacity. They secured a multi-year order exceeding $75 million in the energy sector in early 2025, which will start to diversify revenue into electrification markets. The current backlog for this specialty film is already over $30 million, and they expect sales to more than double in 2026 as this capacity comes online.

Knowles Corporation's competitive advantage is built on what they call 'customer application intimacy,' which means they work closely with clients to create custom-engineered solutions, then scale production with world-class operational capabilities. This focus on unique technologies for demanding applications-like defense systems and advanced hearing health-gives them pricing power and a sticky customer base. Plus, their balance sheet is healthy, as shown by the $20 million in share repurchases and $15 million in debt reduction in Q3 2025 alone.

To be fair, what this estimate hides is the risk in the Medtech segment if new product design wins don't ramp up as quickly as anticipated. Still, the Precision Devices segment, especially with its strong defense bookings and the acquisition of Cornell Dubilier in late 2023, provides a solid, defensive foundation. For a deeper dive into the full financial picture, you should check out Breaking Down Knowles Corporation (KN) Financial Health: Key Insights for Investors.

Here is a snapshot of the segment growth expectations for 2025:

Your next step is to monitor the Q4 2025 results for any updates on the Specialty Film capacity ramp and the 2026 organic growth guidance, which is currently anticipated at the high end of the 4% to 6% range.