Karat Packaging has had an impressive run over the past six months as its shares have beaten the S&P 500 by 7.8%. The stock now trades at $28.40, marking a 12.6% gain. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is it too late to buy KRT? Find out in our full research report, it’s free.
Why Does KRT Stock Spark Debate?
Founded as Lollicup, Karat Packaging (NASDAQ: KRT) distributes and manufactures environmentally-friendly disposable foodservice packaging solutions.
Two Things to Like:
1. Long-Term Revenue Growth Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Karat Packaging’s sales grew at a solid 9.6% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Karat Packaging’s margin expanded by 7.3 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Karat Packaging’s free cash flow margin for the trailing 12 months was 6.3%.
One Reason to be Careful:
EPS Took a Dip Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Sadly for Karat Packaging, its EPS declined by 7% annually over the last two years while its revenue grew by 7.4%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Karat Packaging’s merits more than compensate for its flaws, and with its shares beating the market recently, the stock trades at 14.1× forward P/E (or $28.40 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More Than Karat Packaging
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it's flagging for this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
