Intrinsic value of Herman Miller, Inc. - MLHR

Previous Close

$38.02

  Intrinsic Value

$44.60

stock screener

  Rating & Target

hold

+17%

Previous close

$38.02

 
Intrinsic value

$44.60

 
Up/down potential

+17%

 
Rating

hold

We calculate the intrinsic value of MLHR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
Revenue, $m
  2,569
  2,765
  2,968
  3,179
  3,398
  3,626
  3,864
  4,110
  4,367
  4,635
  4,913
  5,204
  5,506
  5,822
  6,152
  6,496
  6,856
  7,232
  7,625
  8,036
  8,467
  8,917
  9,388
  9,882
  10,399
  10,940
  11,508
  12,102
  12,726
  13,380
Variable operating expenses, $m
  2,351
  2,527
  2,710
  2,901
  3,099
  3,305
  3,519
  3,741
  3,973
  4,214
  4,432
  4,694
  4,967
  5,252
  5,550
  5,860
  6,185
  6,524
  6,879
  7,250
  7,638
  8,044
  8,469
  8,914
  9,381
  9,869
  10,381
  10,918
  11,480
  12,070
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,351
  2,527
  2,710
  2,901
  3,099
  3,305
  3,519
  3,741
  3,973
  4,214
  4,432
  4,694
  4,967
  5,252
  5,550
  5,860
  6,185
  6,524
  6,879
  7,250
  7,638
  8,044
  8,469
  8,914
  9,381
  9,869
  10,381
  10,918
  11,480
  12,070
Operating income, $m
  218
  238
  257
  278
  300
  322
  345
  369
  394
  421
  481
  509
  539
  570
  602
  636
  671
  708
  747
  787
  829
  873
  919
  967
  1,018
  1,071
  1,127
  1,185
  1,246
  1,310
EBITDA, $m
  303
  326
  350
  375
  401
  428
  456
  485
  515
  547
  580
  614
  650
  687
  726
  767
  809
  853
  900
  948
  999
  1,052
  1,108
  1,166
  1,227
  1,291
  1,358
  1,428
  1,502
  1,579
Interest expense (income), $m
  13
  16
  19
  23
  27
  31
  36
  40
  45
  49
  54
  60
  65
  71
  77
  83
  89
  96
  103
  110
  118
  126
  134
  143
  152
  162
  172
  183
  194
  205
  218
Earnings before tax, $m
  203
  218
  234
  251
  268
  286
  305
  325
  345
  366
  421
  444
  468
  493
  519
  547
  575
  605
  636
  669
  703
  738
  776
  815
  856
  899
  944
  991
  1,040
  1,092
Tax expense, $m
  55
  59
  63
  68
  72
  77
  82
  88
  93
  99
  114
  120
  126
  133
  140
  148
  155
  163
  172
  181
  190
  199
  209
  220
  231
  243
  255
  268
  281
  295
Net income, $m
  148
  159
  171
  183
  196
  209
  223
  237
  252
  267
  308
  324
  342
  360
  379
  399
  420
  442
  464
  488
  513
  539
  566
  595
  625
  656
  689
  723
  760
  797

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,597
  1,718
  1,844
  1,976
  2,112
  2,254
  2,401
  2,555
  2,714
  2,880
  3,054
  3,234
  3,422
  3,619
  3,824
  4,038
  4,261
  4,495
  4,739
  4,995
  5,262
  5,542
  5,835
  6,141
  6,463
  6,799
  7,152
  7,522
  7,909
  8,315
Adjusted assets (=assets-cash), $m
  1,597
  1,718
  1,844
  1,976
  2,112
  2,254
  2,401
  2,555
  2,714
  2,880
  3,054
  3,234
  3,422
  3,619
  3,824
  4,038
  4,261
  4,495
  4,739
  4,995
  5,262
  5,542
  5,835
  6,141
  6,463
  6,799
  7,152
  7,522
  7,909
  8,315
Revenue / Adjusted assets
  1.609
  1.609
  1.610
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
  1.609
Average production assets, $m
  578
  622
  668
  715
  765
  816
  869
  925
  983
  1,043
  1,105
  1,171
  1,239
  1,310
  1,384
  1,462
  1,543
  1,627
  1,716
  1,808
  1,905
  2,006
  2,112
  2,223
  2,340
  2,462
  2,589
  2,723
  2,863
  3,010
Working capital, $m
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
  83
  88
  92
  97
  102
  107
Total debt, $m
  340
  407
  476
  549
  624
  702
  783
  868
  956
  1,047
  1,143
  1,242
  1,346
  1,454
  1,567
  1,685
  1,808
  1,937
  2,071
  2,212
  2,359
  2,514
  2,675
  2,844
  3,021
  3,207
  3,401
  3,605
  3,818
  4,042
Total liabilities, $m
  880
  947
  1,016
  1,089
  1,164
  1,242
  1,323
  1,408
  1,496
  1,587
  1,683
  1,782
  1,886
  1,994
  2,107
  2,225
  2,348
  2,477
  2,611
  2,752
  2,899
  3,054
  3,215
  3,384
  3,561
  3,746
  3,941
  4,144
  4,358
  4,582
Total equity, $m
  717
  771
  828
  887
  948
  1,012
  1,078
  1,147
  1,219
  1,293
  1,371
  1,452
  1,537
  1,625
  1,717
  1,813
  1,913
  2,018
  2,128
  2,243
  2,363
  2,488
  2,620
  2,758
  2,902
  3,053
  3,211
  3,377
  3,551
  3,734
Total liabilities and equity, $m
  1,597
  1,718
  1,844
  1,976
  2,112
  2,254
  2,401
  2,555
  2,715
  2,880
  3,054
  3,234
  3,423
  3,619
  3,824
  4,038
  4,261
  4,495
  4,739
  4,995
  5,262
  5,542
  5,835
  6,142
  6,463
  6,799
  7,152
  7,521
  7,909
  8,316
Debt-to-equity ratio
  0.470
  0.530
  0.580
  0.620
  0.660
  0.690
  0.730
  0.760
  0.780
  0.810
  0.830
  0.860
  0.880
  0.890
  0.910
  0.930
  0.940
  0.960
  0.970
  0.990
  1.000
  1.010
  1.020
  1.030
  1.040
  1.050
  1.060
  1.070
  1.080
  1.080
Adjusted equity ratio
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  148
  159
  171
  183
  196
  209
  223
  237
  252
  267
  308
  324
  342
  360
  379
  399
  420
  442
  464
  488
  513
  539
  566
  595
  625
  656
  689
  723
  760
  797
Depreciation, amort., depletion, $m
  85
  89
  93
  97
  101
  106
  111
  116
  121
  126
  99
  105
  111
  117
  124
  131
  138
  145
  153
  161
  170
  179
  189
  199
  209
  220
  231
  243
  256
  269
Funds from operations, $m
  233
  248
  264
  280
  297
  315
  333
  353
  373
  394
  406
  429
  452
  477
  503
  530
  558
  587
  618
  650
  683
  718
  755
  793
  834
  876
  920
  967
  1,015
  1,066
Change in working capital, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
Cash from operations, $m
  231
  246
  262
  278
  295
  313
  332
  351
  371
  391
  404
  427
  450
  475
  500
  527
  555
  584
  614
  646
  680
  715
  751
  789
  830
  872
  916
  962
  1,010
  1,061
Maintenance CAPEX, $m
  -48
  -52
  -56
  -60
  -64
  -68
  -73
  -78
  -83
  -88
  -93
  -99
  -105
  -111
  -117
  -124
  -131
  -138
  -145
  -153
  -161
  -170
  -179
  -189
  -199
  -209
  -220
  -231
  -243
  -256
New CAPEX, $m
  -42
  -44
  -46
  -48
  -49
  -51
  -53
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -81
  -85
  -88
  -93
  -97
  -101
  -106
  -111
  -116
  -122
  -128
  -134
  -140
  -147
Cash from investing activities, $m
  -90
  -96
  -102
  -108
  -113
  -119
  -126
  -134
  -141
  -148
  -156
  -164
  -173
  -182
  -191
  -201
  -212
  -223
  -233
  -246
  -258
  -271
  -285
  -300
  -315
  -331
  -348
  -365
  -383
  -403
Free cash flow, $m
  141
  151
  161
  171
  182
  194
  205
  218
  230
  243
  248
  263
  277
  293
  309
  326
  343
  362
  381
  401
  421
  443
  466
  490
  515
  541
  568
  597
  627
  658
Issuance/(repayment) of debt, $m
  65
  67
  70
  72
  75
  78
  81
  85
  88
  92
  95
  99
  104
  108
  113
  118
  123
  129
  135
  141
  147
  154
  161
  169
  177
  185
  194
  204
  214
  224
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  65
  67
  70
  72
  75
  78
  81
  85
  88
  92
  95
  99
  104
  108
  113
  118
  123
  129
  135
  141
  147
  154
  161
  169
  177
  185
  194
  204
  214
  224
Total cash flow (excl. dividends), $m
  206
  218
  230
  244
  257
  272
  287
  302
  318
  335
  344
  362
  381
  401
  422
  444
  466
  490
  515
  541
  569
  597
  627
  659
  692
  726
  763
  800
  840
  882
Retained Cash Flow (-), $m
  -52
  -55
  -57
  -59
  -61
  -64
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -88
  -92
  -96
  -100
  -105
  -110
  -115
  -120
  -126
  -132
  -138
  -144
  -151
  -158
  -166
  -174
  -182
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  154
  163
  174
  185
  196
  208
  220
  233
  247
  260
  266
  281
  297
  313
  330
  348
  366
  385
  406
  427
  449
  472
  496
  521
  548
  575
  604
  634
  666
  700
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  147
  149
  151
  152
  152
  151
  149
  146
  142
  137
  126
  120
  113
  105
  97
  88
  80
  71
  62
  54
  46
  39
  33
  27
  21
  17
  13
  10
  7
  5
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Herman Miller, Inc. is engaged in the research, design, manufacture, sale and distribution of office furniture systems, seating products, home furnishings and related services, among others. The Company's segments include North American Furniture Solutions, which includes the design, manufacture and sale of furniture products for work-related settings, including office, education and healthcare environments, across the United States and Canada; EMEA, Latin America, and Asia Pacific (ELA) Furniture Solutions, which includes the operations associated with the design, manufacture, and sale of furniture products, primarily for work-related settings, in the Europe, Middle East and Africa (EMEA), Latin America and Asia-Pacific geographic regions, among others; Specialty segment, which includes the design, manufacture and sale of furniture products and textiles, and Consumer segment, which includes the sale of modern design furnishings and accessories to third-party retail distributors.

FINANCIAL RATIOS  of  Herman Miller, Inc. (MLHR)

Valuation Ratios
P/E Ratio 18.3
Price to Sales 1
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 11.2
Price to Free Cash Flow 19.7
Growth Rates
Sales Growth Rate 0.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2.4%
Cap. Spend. - 3 Yr. Gr. Rate 16.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 34%
Total Debt to Equity 34%
Interest Coverage 15
Management Effectiveness
Return On Assets 10.5%
Ret/ On Assets - 3 Yr. Avg. 10.8%
Return On Total Capital 16.2%
Ret/ On T. Cap. - 3 Yr. Avg. 16.6%
Return On Equity 22.3%
Return On Equity - 3 Yr. Avg. 25.4%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 37.9%
Gross Margin - 3 Yr. Avg. 37.8%
EBITDA Margin 11%
EBITDA Margin - 3 Yr. Avg. 10%
Operating Margin 8.4%
Oper. Margin - 3 Yr. Avg. 8.5%
Pre-Tax Margin 7.8%
Pre-Tax Margin - 3 Yr. Avg. 7.8%
Net Profit Margin 5.4%
Net Profit Margin - 3 Yr. Avg. 5.4%
Effective Tax Rate 30.9%
Eff/ Tax Rate - 3 Yr. Avg. 31.3%
Payout Ratio 31.5%

MLHR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MLHR stock intrinsic value calculation we used $2381 million for the last fiscal year's total revenue generated by Herman Miller, Inc.. The default revenue input number comes from 0001 income statement of Herman Miller, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MLHR stock valuation model: a) initial revenue growth rate of 7.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for MLHR is calculated based on our internal credit rating of Herman Miller, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Herman Miller, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MLHR stock the variable cost ratio is equal to 91.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MLHR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.7% for Herman Miller, Inc..

Corporate tax rate of 27% is the nominal tax rate for Herman Miller, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MLHR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MLHR are equal to 22.5%.

Life of production assets of 11.2 years is the average useful life of capital assets used in Herman Miller, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MLHR is equal to 0.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $664.6 million for Herman Miller, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 58.774 million for Herman Miller, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Herman Miller, Inc. at the current share price and the inputted number of shares is $2.2 billion.

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