MLKN

MillerKnoll is a stagnant, leveraged cyclical trading at a deep-value multiple. FY2025 revenue of $3.67B grew just 1.1% and has gone nowhere since the FY2023 peak of $4.09B, while the company swung back to a net loss of -$36.9M (-1.0% margin, -2.9% ROE) as operating income collapsed 69.8% to $50.5M (a razor-thin 1.4% operating margin). The five-year history is telling: outside the FY2021 WFH boom ($175M net income), profitability has been erratic ever since the July 2021 Knoll acquisition, which the 10-K confirms loaded the balance sheet with $1.31B of long-term debt. Liabilities/equity of 2.05x and a financial-maintenance leverage covenant that 'restricts the ability...to declare or pay dividends' or repurchase shares are the central risk — covenant pressure in a downturn could force a cut to the very capital returns supporting the stock.

The offsetting case is valuation and cash generation. At $20.46 the market cap is only $1.39B — a 0.4x P/S on $3.67B of revenue and roughly 6.7x operating cash flow of $209M. Gross margin held at a respectable 38.8%, R&D continued at $93.8M, and the company still funded $51.7M of dividends (~3.7% yield) plus $84.9M of buybacks. The catch: OCF fell 40.6%, capex rose 37.2% to $108M, and combined dividends + buybacks ($136.6M) exceeded free cash flow (~$101M), draining cash 15.9% to $194M. That pace of capital return is not sustainable without an earnings recovery.