Playing with BigCharts & Justifying Herman Miller

So after a trip to see my brother during the holiday weekend, I spent some time playing with a new-to-me website called BigCharts which is a service of MarketWatch. After throwing in some stocks of mine like FTO, HMC, and a stock Grant wanted me to research IR, I got back to MLHR. See the interactive 1 year chart of Herman Miller right here. Adjust the settings to show the three to four years of trending.

My point is that here is a company that has shown increasing earnings consistently for over four years, increased it's dividend each year, consistently great earnings reports each quarter, low p/e of 10.1, and yet it is near its 52 week low on share price. Why aren't people screaming for this stock to go up? Maybe because they make furniture, I don't know. You all should take a look and tell me what I am not seeing.
(Edit later on 5/27/08): Found a good article by someone named Paul Price on Seeking Alpha about MLHR here. Also, he has me interested in Coca-Cola now.


Mike said...

Hi MJ..

I did what you asked and took a closer look.

You're right, MLHR seems to be a well-run company. A couple of things did catch my eye.

1. They doubled their long-term debt for an unusual reason of buying back their shares. However, they got good terms on their interest rates and they paid off their previous higher interest rate debt.

I'm not sure that I agree it would be a good idea to increase their debt load, especially since they know that they're entering into a period of negative growth, but for some reason, management thinks that would be a better use of their money.

2. They also have less cash on hand compared to last year.

Nothing majorly bad though, especially when compared with the positives.

I'm guessing the only reason that their stock is trading so low is because of the following statement from their latest 10Q:
We are pleased with the overall performance for the quarter and first nine months of fiscal 2008. However, we remain appropriately cautious in light of the current economic climate. The Business Institutional Furniture Manufacturer’s Association (BIFMA) issued its most recent domestic industry forecast in February 2008. BIFMA expects that the growth rate of office furniture orders and shipment levels in the U.S. will continue to be positive, although at a lower rate of growth, through the first half of calendar year 2008. BIFMA forecasts that the growth rate will turn negative in the third quarter of calendar year 2008, as a result of weak economic fundamentals. A slowdown in economic growth and business investment are primary drivers of this downward revision. The implementation of proactive changes to our business model, capital structure and overall business mix will help to mitigate the impact of these domestic U.S. economic challenges.


MJ @ Dyslexic Research said...

I saw the buying back of shares as two things, one to protect the stock from falling any further and two to purchase some of the own company at a good price.

I agree with the pessimistic statement affecting stock price, and I do hope that their product mix is enough to handle a business specific down turn. I guess we will all see what happens, right now I am still buying.

MJ @ Dyslexic Research said...

oh and thanks for the extra research and comment...

Mike said...

"oh and thanks for the extra research and comment..."

According to my blog's disclaimer: I'm just a guy with an opinion. ;-)

But, you're very welcome.