MillerKnoll’s 21.5% return over the past six months has outpaced the S&P 500 by 15.1%, and its stock price has climbed to $23.62 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in MillerKnoll, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is MillerKnoll Not Exciting?
Despite the momentum, we’re sitting this one out for now. Here are three reasons why there are better opportunities than MLKN, plus one stock we’d rather own.
1. Lackluster Revenue Growth
Long-term growth is the most important, but within business services, a stretched historical view may miss new innovations or demand cycles. MillerKnoll’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 2.9% over the last two years was well below its five-year trend. 
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for MillerKnoll, its EPS declined by 11% annually over the last five years while its revenue grew by 9.3%. This tells us the company became less profitable on a per-share basis as it expanded.
3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
MillerKnoll has shown poor cash profitability relative to peers over the last five years, giving the company fewer opportunities to return capital to shareholders. Its free cash flow margin averaged 2.2%, below what we’d expect for a business services business.
Final Judgment
MillerKnoll isn’t a terrible business, but it doesn’t pass our quality test. With its shares topping the market in recent months, the stock trades at 11.2× forward P/E (or $23.62 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We’re pretty confident there are more exciting stocks to buy at the moment. Let us point you toward one of our top software and edge computing picks.
Stocks We Would Buy Instead of MillerKnoll
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