Should you buy MillerKnoll stock?
MillerKnoll stock analysis. MLKN stock.
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Furniture company MillerKnoll was created in 2021 from the combination of Herman Miller and Knoll. The combined business includes many high end office furniture brands.
The business has had a difficult couple of years dealing first with COVID and then supply chain disruptions.
The pandemic caused a shift in work-from-home trends which is not ideal for an office furniture company like MillerKnoll. More recently, companies have been laying off workers and there’s concern about the commercial real estate sector. Neither are good for office furniture sales.
As you can see from the latest sales trends, orders are not showing much sign of growth and gross margins at 35% remain below pre pandemic levels.
Right now, the company has a market cap of 1.3 billion. But with 1.4 billion of debt, the enterprise value is roughly 2.5 billion.
Revenue over the last 12 months got a boost from the Knoll acquisition and sits at 4.2 billion.
Meanwhile, net income was 68 million. So Millerknoll is currently valued at 0.6 times revenue or 15 times earnings.
Long term debt of 1.4 billion is 2.6 times ebitda so the company not only needs to manage sales but keep up with debt repayments.
And CEO Andi Owen came under pressure last week after a leaked Zoom call showed her telling employees to forget about bonuses and to leave ‘pity city’.
This is not a good look and signals potential mismanagement.
However, the valuation applied to MillerKnoll looks too cheap.
You can see that the stock is only just above its COVID lows and the price to sales ratio is below the bottom of its historical average.
#stocks #investing #stockstobuy #overlookedalpha
Visit our Substack for more: https://www.overlookedalpha.com
Furniture company MillerKnoll was created in 2021 from the combination of Herman Miller and Knoll. The combined business includes many high end office furniture brands.
The business has had a difficult couple of years dealing first with COVID and then supply chain disruptions.
The pandemic caused a shift in work-from-home trends which is not ideal for an office furniture company like MillerKnoll. More recently, companies have been laying off workers and there’s concern about the commercial real estate sector. Neither are good for office furniture sales.
As you can see from the latest sales trends, orders are not showing much sign of growth and gross margins at 35% remain below pre pandemic levels.
Right now, the company has a market cap of 1.3 billion. But with 1.4 billion of debt, the enterprise value is roughly 2.5 billion.
Revenue over the last 12 months got a boost from the Knoll acquisition and sits at 4.2 billion.
Meanwhile, net income was 68 million. So Millerknoll is currently valued at 0.6 times revenue or 15 times earnings.
Long term debt of 1.4 billion is 2.6 times ebitda so the company not only needs to manage sales but keep up with debt repayments.
And CEO Andi Owen came under pressure last week after a leaked Zoom call showed her telling employees to forget about bonuses and to leave ‘pity city’.
This is not a good look and signals potential mismanagement.
However, the valuation applied to MillerKnoll looks too cheap.
You can see that the stock is only just above its COVID lows and the price to sales ratio is below the bottom of its historical average.
#stocks #investing #stockstobuy #overlookedalpha
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NewsTranscript
00:00 Should You Buy Miller Knoll Stock? Furniture company Miller Knoll was
00:04 created in 2021 from the combination of Herman Miller and Knoll. The combined business includes
00:10 many high-end office furniture brands. The business has had a difficult couple of years
00:15 dealing first with Covid and then supply chain disruptions. The pandemic caused a shift in work
00:21 from home trends which is not ideal for an office furniture company like Miller Knoll.
00:26 More recently companies have been laying off workers and there's concern about the commercial
00:30 real estate sector. Neither are good for office furniture sales. As you can see from the latest
00:36 sales trends, orders are not showing much sign of growth and gross margins at 35% remain below
00:42 pre-pandemic levels. Right now the company has a market cap of $1.3 billion but with $1.4 billion
00:48 of debt, the enterprise value is roughly $2.5 billion. Revenue over the last 12 months got a
00:54 boost from the Knoll acquisition and sits at $4.2 billion. Meanwhile net income was $68 million,
01:00 so Miller Knoll is currently valued at 0.6 times revenue or 15 times earnings. Long-term debt of
01:06 $1.4 billion is 2.6 times EBITDA so the company not only needs to manage sales but keep up with
01:12 debt repayments. CEO Andy Owen came under pressure last week after a leaked Zoom call showed her
01:19 telling employees to forget about bonuses and to leave pity city. This is not a good look and
01:25 signals potential mismanagement. However the valuation applied to Miller Knoll looks too cheap.
01:31 You can see that the stock is only just above its COVID lows and the price to sales ratio is below
01:37 the bottom of its historical average as well. Let's fast forward to 5 years from now and assume
01:42 that revenues are still at $4.2 billion but the company has managed to get back to its historical
01:47 net margin which is around 5%. Under that scenario net income would be $210 million in 5 years time.
01:55 Apply a 15 times multiple to that figure and you get a market cap of $3.15 billion which works out
02:02 to an investment return of 19.2% per year. And that's before taking into account the dividend
02:08 which currently sits at 4.3%. Miller Knoll stock is under pressure right now and for good reason.
02:14 People are working from home more often, companies are laying off workers,
02:18 the business has significant debt and management is questionable. But office furniture will still
02:23 be needed in the future, debt should be repaid and management may well get replaced. Moreover
02:29 prices of raw materials are coming down which should help Miller Knolls bottom line. Overall
02:34 I think there's a bit too much pessimism around the stock and that's why I think it could be a
02:39 good time to buy. But these are my personal opinions not financial advice and I do own
02:45 some shares in the company. For more detailed investing ideas visit our website overlookedalpha.com