Just like last week, the market is in a perilous position. The NASDAQ is just a bad day from breaking the most important support level, a double bottom at the 52-week low. Investors just can’t have any confidence that the worst is over for prices.
During these uncertain times, building a list of potential buy candidates for the bull market could be a good use of time. Of course, our focus is companies with insider buying.
Last week’s roster of purchases wasn’t the best we’ve seen; it was really lean. MillerKnoll, Inc. (MLKN) was the lone company with any interest, in our opinion. MillerKnoll designs, manufactures, and distributes interior furnishings worldwide.
As of May 28, 2022, the company operated 70 retail studios including 35 operating under the DWR brand, 7 under the HAY brand, 22 Herman Miller stores, 2 Muuto stores, 3 Knoll stores, and a multi-brand Chicago store. Its products are used in institutional, health/science, and residential and other environments; transportation terminals; and industrial and educational settings.
MillerKnoll Chief Executive Officer (CEO) Andrea Owen’s only previous activity with MLKN stock was either options or tax related. She never purchased any stock as an insider before last week. Well, the CEO didn’t mess around and went BIG. Owen bought 60,606 shares of MillerKnoll stock at $16.88 for a little more than $1 million. (1) Now, that’s coming out of the box swinging.
Her statement buy comes a little more than a dollar above the 52-week low of $15.54. MLKN has been as high as $42.84 in the last year. As we type, MLKN trades at $17.36 and analysts have a one-year consensus price target of $28.00. (2) That’s potential upside of 61.3%, not including the 4.32% dividend yield.
The handful of analysts covering the furniture maker believe earnings per share will rise from $2.01 this year to $2.60 in fiscal year 2024. Meanwhile, the top is forecast to increase at a slower rate, from $4.21 billion in the current fiscal year to $4.34 billion next year. (3)
Perhaps CEO Owen saw value in her company stock as the Consumer Cyclical company trades at a discount to its peer group. The typical competitor trades at an average price to earnings ratio (P/E) of 13.7 compared to 9.6 for MillerKnoll. The same holds true on a price to sales (P/S) basis with the industry average at 1.52 versus 0.31 for MLKN.
We will focus on P/E to create a potential price target with such a big P/S discrepancy between MillerKnoll and its peers. If the furniture maker trades at the industry average P/E and hits Wall Street’s fiscal 2024 EPS mark of $2.60, shares would trade for $35.62, almost double where they are today.
Overall: MillerKnoll, Inc. (MLKN) could be an excellent candidate for investors to add to their watchlists. Shares offer a good mix of growth and income potential using Wall Street’s one-year price target and the attractive 4.32% dividend yield.
With a beta of 1.42 (the S&P 500’s beta is 1), MillerKnoll is only appropriate for aggressive investors with at least a 12-18 month time horizon.
1 – https://www.secform4.com/insider-trading/1747270.htm
2 – https://finance.yahoo.com/quote/MLKN?p=MLKN
3 – https://finance.yahoo.com/quote/MLKN/analysis?p=MLKN