Breaking Down Kimball Electronics, Inc. (KE) Financial Health: Key Insights for Investors

You're looking at Kimball Electronics, Inc. (KE) and seeing a classic mixed signal: a company navigating a tough macro environment but showing real operational discipline. Honestly, the headline numbers from fiscal year 2025 (FY2025) are a little soft, with full-year revenue landing at $1.487 billion and net income at $17.0 million, both down year-over-year. But here's the quick math that matters: KE generated a record $183.9 million in cash from operations, which is why they were able to pay down debt by 50% in the fiscal year. This cash generation is defintely the story. Still, you have to weigh this against the near-term risk of a projected 1.0% annual revenue decline over the next two years, especially with the broader US electronic industry expected to grow by over 8.1%. The opportunity lies in their Medical segment, which is showing strong growth, offsetting weakness in other verticals like North American automotive. We're going to break down how that operational strength-that ability to control the controllables-maps to a clear investment thesis for the next 12 months.

Revenue Analysis

You need to know if Kimball Electronics, Inc. (KE) is growing, and the short answer for the last fiscal year is no, but the why matters more than the number itself. The company's full-year revenue for fiscal year (FY) 2025 came in at $1.49 billion, which represents a significant year-over-year decline of -13.29% from FY 2024.

That drop is a tough headline, but it wasn't driven by a widespread failure of their core business model. Instead, it was largely due to the loss of two major, specific customer programs over two years, including a $100 million impact in FY 2025 from an electronic braking program transfer in Reynosa, Mexico. The company is an Electronics Manufacturing Services (EMS) provider, meaning they build durable electronics for other companies, so losing a big contract like that hits the top line hard.

Here's the quick math on the recent trend:

To be fair, the decline in FY 2025 is a direct continuation of the previous year's revenue drop, which was also impacted by a separate $100 million event-a major medical customer's FDA recall that restricted their ability to ship product. These are program-specific risks, not systemic market failure, but they defintely highlight the concentration risk in their customer base.

Primary Revenue Streams and Segment Shifts

Kimball Electronics, Inc. (KE) operates across three primary end markets: Automotive, Medical, and Industrial/Public Safety. While the company doesn't publicly break out the exact percentage contribution for the full year, we know the flow of funds is geographically concentrated, with the maximum revenue derived from their operations in Mexico.

The company's strategy is to diversify, and we're seeing that play out in the most recent quarter (Q1 FY 2026, ending September 30, 2025), where the medical vertical showed strong year-over-year sales growth. This is the key opportunity to watch. Medical is a high-margin, sticky business, and its growth is a necessary counterweight to the volatility in the automotive sector.

• Automotive: Produces safety-critical electronic assemblies.
• Medical: Focus on contract manufacturing organization (CMO) services.
• Industrial/Public Safety: Durable electronics for various applications.

The core takeaway is that the revenue picture is mixed: significant top-line contraction from two large, non-recurring customer losses, but a clear, profitable growth engine emerging in the medical sector. If you want to dig deeper into the ownership structure behind these segments, you should check out Exploring Kimball Electronics, Inc. (KE) Investor Profile: Who's Buying and Why?

Profitability Metrics

You're looking for a clear picture of how much money Kimball Electronics, Inc. (KE) actually keeps from its sales, and honestly, the margins in the Electronics Manufacturing Services (EMS) industry are thin. KE's fiscal year (FY) 2025 results show a company navigating a tough, low-margin environment while strategically pivoting to higher-value business lines.

For FY 2025, Kimball Electronics, Inc. reported total revenue of nearly $1.49 billion, but the profitability ratios tell a story of tight operational control being tested by market headwinds. Here's the quick math on the key margins:

• Gross Profit Margin: Approximately 7.4%. This is calculated from the reported cost of sales, which consumed about $1.38 billion, or 93% of total revenue.
• Operating Profit Margin (Adjusted): The company's guidance for the full year targeted a range of 3.4% to 3.6%, so we'll use the midpoint of roughly 3.5%.
• Net Profit Margin: A slim 1.14%, derived from a net income of $17.0 million on that nearly $1.49 billion in sales.

That 1.14% net margin is defintely tight. It means that for every dollar of sales, KE only pockets about 1.14 cents after all expenses and taxes are paid.

Looking at trends, KE's net income for FY 2025 was down about 17% from the previous fiscal year, which is a clear sign of the sustained period of declining customer demand they've been facing. To be fair, the nature of EMS-building complex products for others-means high material and labor costs (Cost of Goods Sold), which naturally compresses the gross margin. The challenge is converting that slim gross profit into a respectable operating profit (earnings before interest and taxes).

When you stack Kimball Electronics, Inc. against its peers, the operational efficiency picture gets clearer. For instance, a major competitor like Flex Ltd. recently posted an operating margin of 6.2%. KE's adjusted operating margin of 3.5% is significantly lower, suggesting that while the company is managing costs, it's not yet achieving the same level of scale or high-margin product mix as the industry leaders. The historical average operating margin for KE has hovered around 4.4%, which analysts have previously flagged as subpar for the industrials sector.

The good news is the company is actively working to improve this via a strategic shift. They are leveraging cash generated from their core EMS operations to expand their higher-margin Medical Contract Manufacturing Organization (CMO) business, including a new 300,000 sq. ft. facility in Indianapolis. This move toward specialized, high-value medical devices and precision plastics is the long-term play to get those margins up. Analysts forecast this pivot could help net margins expand to 2.8% by 2028. Still, that margin expansion will take time to materialize, and heavy capital expenditure for the new facility could squeeze free cash flow in the near term.

For a deeper look at how the balance sheet supports this strategic pivot, check out the full post: Breaking Down Kimball Electronics, Inc. (KE) Financial Health: Key Insights for Investors

Debt vs. Equity Structure

Kimball Electronics, Inc. (KE) is operating with a very conservative capital structure, prioritizing debt reduction and maintaining a low leverage profile. The company's Debt-to-Equity (D/E) ratio stood at approximately 0.3 at the close of fiscal year 2025, a significant de-leveraging from the prior year that signals strong balance sheet management. This low ratio means Kimball Electronics, Inc. relies much more on shareholder equity than borrowed money to finance its assets.

Overview of Debt Levels (FY2025)

The company made substantial progress in reducing its overall debt load throughout fiscal year 2025. Total borrowings were cut by approximately 50% from the beginning of the fiscal year to the end of Q4 FY2025, demonstrating a clear focus on financial discipline. This reduction was largely driven by positive cash flow from operations.

Here's the quick math on the debt composition at the end of the 2025 fiscal year (June 30, 2025), with all figures in millions of U.S. Dollars:

This debt reduction trend continued into the new fiscal year, with total borrowings dropping further to $138 million by September 30, 2025.

Debt-to-Equity and Industry Comparison

Kimball Electronics, Inc.'s D/E ratio is a major strength. The D/E ratio measures the proportion of a company's assets financed by debt relative to the proportion financed by equity (Share Owners' Equity). At the end of FY2025, the ratio was roughly 0.3. This is a very comfortable level.

To be fair, this is a much lower leverage profile than the broader Information Technology sector average, which sits around 0.319 (or 31.9%). More pointedly, compared to peers in the Electronics Manufacturing Services (EMS) space, Kimball Electronics, Inc. is managing its balance sheet with caution. For instance, a comparable company like Sanmina Corporation has a Debt/Total Equity of around 14.1% (or 0.141). Kimball Electronics, Inc.'s ratio of 0.3 is higher than this specific peer, but the overall figure is still low enough to be considered financially healthy, providing a significant buffer against economic downturns. Low debt is defintely a good sign for stability.

Financing Strategy and Recent Activity

Kimball Electronics, Inc.'s recent activity clearly favors internal funding and debt paydown over new debt issuances. The company has not announced any major new debt issuances or credit rating changes in 2025; instead, the focus has been on reducing its outstanding borrowings on its existing credit facility.

The company is balancing its financing by:

• Using positive cash flow from operations-seven consecutive quarters of positive cash generation-to pay down debt.
• Maintaining significant short-term liquidity, with an available borrowing capacity of approximately $294.3 million on its credit facilities as of Q1 FY2026 (September 30, 2025).
• Continuing a share repurchase program, investing $1.5 million in Q1 FY2026 to buy back 49,000 shares, which is a form of returning capital to equity holders.

This strategy shows a clear pivot: use cash generated from operations to de-leverage the balance sheet while retaining a large, unused credit facility for strategic, opportunistic investments, particularly in the medical Contract Manufacturing Organization (CMO) space, which is a key growth area for the company. You can read more about this strategic direction in Breaking Down Kimball Electronics, Inc. (KE) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You need to know if Kimball Electronics, Inc. (KE) can cover its near-term bills and whether its balance sheet is defintely strong enough for the long haul. The short answer is yes, their liquidity position is solid, driven by a strong focus on working capital efficiency and debt reduction throughout the 2025 fiscal year.

A quick look at the core liquidity ratios confirms this. For the end of fiscal year 2025 (FY2025), Kimball Electronics, Inc.'s Current Ratio stood at 2.20. This means the company has $2.20 in current assets for every dollar of current liabilities. Even better, the more stringent Quick Ratio (or Acid-Test Ratio), which strips out inventory, was a robust 1.34. Anything over 1.0 is generally good, so this shows they can cover short-term debts even without having to sell off their stock.

Working Capital and Inventory Discipline

The real story here is the trend in working capital, which has been a major focus for management. They've been wringing out excess inventory, which is a smart move in a volatile supply chain environment. This discipline led to a significant improvement in their Cash Conversion Days (CCD), which dropped to 85 days at the end of FY2025, a sharp improvement from 100 days in FY2024.

Here's the quick math on their inventory management: by the second quarter of FY2025, the company had reduced inventory levels by $149 million, or 33%, year-over-year. This is a clear, actionable signal of better operational efficiency, freeing up cash that was previously tied up in components.

Cash Flow Statement Overview

The cash flow statement tells you exactly where the money is coming from and where it's going. Kimball Electronics, Inc. has been on a positive streak, reporting its sixth consecutive quarter of positive cash flow from operating activities (CFO) by Q4 FY2025.

• Operating Cash Flow (CFO): For the full FY2025, net cash generated from operating activities was strong at $56.5 million. This is the lifeblood of the business, and it shows the core operations are generating cash, not consuming it.
• Investing Cash Flow (CFI): This is where they spend money on the future. Capital expenditures (CapEx) for FY2025 were estimated to be in the $40 million to $50 million range, which is a healthy investment into new facilities, like the one in Indianapolis, to support their strategic push into the medical contract manufacturing (CMO) space.
• Financing Cash Flow (CFF): The company has been actively reducing debt. In Q1 FY2025 alone, they used $52.954 million in financing activities, largely driven by $50 million in payments on credit facilities. This focus has paid off, with total debt falling to $138.0 million by Q1 FY2026, the lowest level in over three years.

The liquidity position is a clear strength, not a concern. The company is generating cash internally and using it to pay down debt while still investing in strategic growth areas like medical manufacturing. The balance sheet is primed for growth. For a deeper dive into the company's strategic shifts, you should check out the full post: Breaking Down Kimball Electronics, Inc. (KE) Financial Health: Key Insights for Investors

Valuation Analysis

You are looking at Kimball Electronics, Inc. (KE) after a significant run-up, wondering if there is any fuel left in the tank. The short answer is that while the stock has appreciated strongly, the company appears to be reasonably valued, leaning toward undervalued when you consider its growth trajectory and peer group multiples. The market is defintely pricing in the recent operational improvements.

Over the last 12 months, Kimball Electronics, Inc. (KE) stock has delivered a powerful return, increasing by 48.45%. This performance, with the stock recently trading around $28.34, reflects the company's strong Q1 2026 earnings beat and positive outlook in the automotive and medical segments. But still, the key is whether the valuation ratios justify the price.

Here is the quick math on the core valuation multiples, using the most recent data as of November 2025:

The Price-to-Book (P/B) ratio of just 1.14x is a strong signal. It means you are essentially paying $1.14 for every dollar of the company's net assets (book value), which is low for a technology-driven manufacturing services company. The Enterprise Value-to-EBITDA (EV/EBITDA) at 7.43x for the trailing twelve months is also quite reasonable, suggesting the company's operating cash flow generation is not being excessively priced by the market.

What this estimate hides is the expected earnings jump. The trailing P/E of 28.17x looks high, but the forward P/E drops sharply to 21.30x based on projected earnings. This is a clear sign that analysts see a significant earnings growth spurt on the horizon, which makes the current price look much cheaper on a forward basis.

From a shareholder return perspective, Kimball Electronics, Inc. (KE) is currently focused on reinvestment and growth, not dividends. The company has a dividend yield and payout ratio of 0.00%, as it does not pay a dividend. If you are looking for income, this is not the stock for you. If you are looking for capital appreciation driven by operational expansion, that changes the calculation.

Wall Street's perspective is overwhelmingly positive. The analyst consensus is generally a 'Buy' or 'Strong Buy', reflecting confidence in the company's execution and market positioning. The average 12-month price target is approximately $33.66, with a range that goes higher. This average target suggests an upside of over 18% from the recent trading price of $28.34.

• Buy/Strong Buy consensus signals analyst confidence.
• Average price target of $33.66 implies significant near-term upside.
• Low P/B and EV/EBITDA suggest a value opportunity despite the stock's recent climb.

For a deeper dive into the company's operational strength, including its SWOT and cash flow, you can check out the full analysis at Breaking Down Kimball Electronics, Inc. (KE) Financial Health: Key Insights for Investors. Your next step should be to model a Discounted Cash Flow (DCF) view by Friday to see if the implied growth rate aligns with the analyst's earnings forecast.

Risk Factors

You're looking at Kimball Electronics, Inc. (KE) right now and seeing a company in transition. That's the simple truth. While their balance sheet is getting stronger-a huge plus-the near-term risks are all about revenue concentration and market demand. You need to map these risks to their strategic pivot to see the defintely clear path forward.

The biggest immediate financial risk is customer concentration and program loss. The nature of the electronics manufacturing services (EMS) business means replacing expiring programs is constant work. For example, the loss of a major automotive program was a key driver in the company's net sales decreasing by 13% in fiscal year 2025 compared to 2024. This kind of revenue hit is a serious headwind, and it's expected to continue, with the loss of an electronic braking program in Reynosa, Mexico, projected to negatively impact fiscal year 2026 revenue by another $60 million.

Beyond customer-specific issues, the external market environment is still challenging. The industrial sector, for instance, continues to see softness, particularly in smart metering and climate control products, and the medical market saw reduced demand due to customer overstocking. Also, as a global manufacturer, Kimball Electronics, Inc. (KE) is exposed to the usual financial risks, like foreign currency fluctuations, interest rate volatility, and the persistent threat of global supply chain disruptions, especially for semiconductors.

Here's a quick look at the core risks and the company's response:

The mitigation strategy is a clear, decisive pivot. Management is using the strong cash flow generated from operations-which hit $150 million in free cash flow for the twelve months ending June 2025-to fortify the balance sheet and strategically invest. They cut borrowings by 50% year-to-date in FY2025. This is smart capital allocation. They are doubling capacity in their Mexico and Thailand facilities and opening a new 300,000 square foot medical manufacturing facility in Indianapolis. This is a move to diversify revenue and chase higher-margin business, which is exactly what you want to see. You can read more about their long-term vision here: Mission Statement, Vision, & Core Values of Kimball Electronics, Inc. (KE).

The key takeaway is that the near-term is messy, but the long-term plan is solid. They are investing heavily in their medical CMO segment, which is a structural growth area, and aggressively managing their working capital. They are trading short-term revenue stability for long-term margin improvement and customer stickiness. Your next step is to monitor their progress on new program wins in the Medical segment, because that's the true measure of this strategic shift.

Growth Opportunities

You want to know where the real money is going to be made with Kimball Electronics, Inc. (KE), and the answer is simple: it's in the high-margin, highly regulated medical space. This isn't just a wish; it's a structural shift. The company is strategically repositioning itself, moving away from lower-margin areas and doubling down on complex, non-commodity products that demand their deep engineering expertise.

For the full fiscal year 2025, Kimball Electronics, Inc. reported revenue of approximately $1.487 billion and a non-GAAP EPS of $0.68. Management's focus is now less on chasing top-line volume and more on margin expansion, targeting adjusted operating income in the range of 3.4% to 3.6% of net sales. That's a realist's approach to a challenging market, but it sets the stage for a stronger 2026.

Key Growth Drivers and Strategic Focus

The near-term growth story for Kimball Electronics, Inc. is centered on two key areas: medical Contract Manufacturing Organization (CMO) and advanced automotive electronics. They are not just waiting for the market to recover; they are building new capacity where the demand is most resilient and the margins are highest.

• Medical CMO Expansion: The biggest move is the new, highly automated 308,000-square-foot facility in Indianapolis, scheduled to open in November 2025. This new site, branded Kimball Solutions, is purpose-built for high-value medical and life sciences manufacturing, including capabilities like cold chain management and full drug delivery device assembly, such as auto-injectors. This is defintely a platform for scalable, long-term growth.
• Automotive Innovation: While the automotive sector is facing headwinds, Kimball Electronics, Inc. is focusing on the complex, mission-critical components that drive future vehicle technology. This includes a ramp-up of new electronic braking programs in Europe and a focus on high-differentiation products like steer-by-wire technologies. The company remains a top player, ranked the 6th largest EMS provider in the automotive vertical in FY25.

Here's the quick math: the medical segment already accounts for a significant portion of their business, where they are ranked the 7th largest EMS provider. The Indianapolis expansion is a direct investment to capture more of that high-value market, which is less cyclical than their traditional EMS business.

Competitive Edge and Positioning

Kimball Electronics, Inc.'s competitive advantage isn't about being the cheapest; it's about being the most reliable partner for complex, high-stakes products. They are a global, multifaceted solutions provider in highly regulated industries.

Their strengths are visible in the accolades they've earned, which translate directly into long-term customer relationships and sustainable revenue streams:

• Service Excellence: The company was honored for achieving the Highest Overall Customer Ratings in all seven categories of CIRCUITS ASSEMBLY'S 2025 Service Excellence Awards for large EMS providers. Customers value that partnership.
• Operational Consistency: They leverage a single instance of SAP and standard Lean Six Sigma practices across all global facilities. This global consistency makes it easier for large OEMs to single-source programs, which leads to multi-year contracts and operating efficiency.
• Focus on Complexity: Their business is intentionally focused on non-commodity products that require high complexity and durability, which naturally leads to higher margins and less competition.

This focus on quality and complexity is what makes their revenue stream more sticky and predictable. If you want to dive deeper into the current valuation and risk factors, you should read the full analysis at Breaking Down Kimball Electronics, Inc. (KE) Financial Health: Key Insights for Investors.

The clear next step is to monitor the ramp-up of the Indianapolis facility, specifically looking for new program wins and the impact on the medical segment's revenue mix in the next two quarters.