MillerKnoll Stock To $12?

MillerKnoll (MLKN) stock has fallen 22% during the past day, and is currently trading at $15.03. Our multi-factor assessment suggests that it may be time to sell MLKN stock. We have, overall, a pessimistic view of the stock, and a price of $12 may not be out of reach. We believe there is a lot to fear in MLKN stock given its overall very weak operating performance and financial condition. Hence, despite its very low valuation, we think that the stock is unattractive.

Below is our assessment:

Ask yourself – Is holding MLKN stock risky? Of course it is. High Quality Portfolio mitigates that risk.

Let’s get into details of each of the assessed factors but before that, for quick background: With $1.0 Bil in market cap, MillerKnoll provides interior furnishings globally for institutional, health, residential, transportation, industrial, and educational environments through contract and retail segments.

[1] Valuation Looks Very Low

This table highlights how MLKN is valued vs broader market. For more details see: MLKN Valuation Ratios

[2] Growth Is Very Weak

• MillerKnoll has seen its top line shrink at an average rate of -4.1% over the last 3 years
• Its revenues have grown 4.3% from $3.6 Bil to $3.7 Bil in the last 12 months
• Also, its quarterly revenues declined -1.6% to $955 Mil in the most recent quarter from $970 Mil a year ago.

This table highlights how MLKN is growing vs broader market. For more details see: MLKN Revenue Comparison

[3] Profitability Appears Very Weak

• MLKN last 12 month operating income was $222 Mil representing operating margin of 5.9%
• With cash flow margin of 5.5%, it generated nearly $207 Mil in operating cash flow over this period
• For the same period, MLKN generated nearly $-25 Mil in net income, suggesting net margin of about -0.7%

This table highlights how MLKN profitability vs broader market. For more details see: MLKN Operating Income Comparison

[4] Financial Stability Looks Weak

• MLKN Debt was $1.8 Bil at the end of the most recent quarter, while its current Market Cap is $1.0 Bil. This implies Debt-to-Equity Ratio of 175.4%
• MLKN Cash (including cash equivalents) makes up $180 Mil of $3.9 Bil in total Assets. This yields a Cash-to-Assets Ratio of 4.6%

[5] Downturn Resilience Is Very Weak

MLKN has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• MLKN stock fell 73.3% from a high of $50.69 on 7 June 2021 to $13.55 on 31 May 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $31.02 on 31 July 2024 , and currently trades at $15.03

 
2020 Covid Pandemic

• MLKN stock fell 63.9% from a high of $41.97 on 6 January 2020 to $15.15 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 10 March 2021

 
2008 Global Financial Crisis

• MLKN stock fell 80.2% from a high of $40.61 on 20 February 2007 to $8.05 on 5 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 2 January 2018

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read MLKN Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.