Herman Miller: Authentic Furniture, Authentic Returns

Dec. 06, 2018 9:30 AM ETMillerKnoll, Inc. (MLKN)1 Comment
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  • Herman Miller has reported two excellent quarters in a row, yet is down over 10% for the last three months.
  • The company offers consistent revenue growth and strong returns.
  • MLHR is trading at 10.7x projected FY2019 EPS.

I often write on Seeking Alpha about names that aren't necessarily headline grabbing companies. With the seemingly non-stop stream of destabilizing political and social news coupled with the ever growing importance of companies like Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOG), it's actually become even easier for these less sexy companies to fly under the radar. Herman Miller, Inc. (NASDAQ:MLHR) fits this description with a business model centered around the design and manufacturing of home and office furniture equipment. Factor in the company's $2B market cap and it appears even more unlikely that you'll see a Herman Miller news story flashing in red on CNBC, but that fact makes the investment opportunity no more or less valuable than other stocks in the market. The investment thesis for MLHR isn't focused on one massive profit driver but rather several different tailwinds causing my bullishness in the stock's future such as solid revenue growth, strategic investments and a very reasonable valuation.

Recent Company Performance

Herman Miller's last two quarterly reports (Q4 FY2018 and Q1 FY2019;the company's fiscal year is staggered 2 quarters from the calendar year) have sent shares flying higher, however shares now trade lower than they did at the time of each of these reports. The chart below begins the first trading day after MLHR's FY 2018 report and ends November 30, 2018. The upward spike in September is following the company's Q1 FY2019 report.

MLHR data by YCharts

The dip in share price largely coincides with the downturn seen in the broader market -- so the question that must be answered is: has Herman Miller's stock been disproportionately punished during a market downturn? The following image from MLHR's Q1 FY2019 Investor Presentation displays the consistent growth generated by Herman Miller over the last five years on both an organic revenue and

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Value-based long term investing

Disclosure: I am/we are long MLHR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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