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The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by MillerKnoll, Inc. (NASDAQ:MLKN) shareholders over the last year, as the share price declined 36%. That falls noticeably short of the market decline of around 10%. However, the longer term returns haven't been so bad, with the stock down 14% in the last three years. The falls have accelerated recently, with the share price down 21% in the last three months.
While the last year has been tough for MillerKnoll shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
MillerKnoll fell to a loss making position during the year. Some investors no doubt dumped the stock as a result. We hope for shareholders' sake that the company becomes profitable again soon.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into MillerKnoll's key metrics by checking this interactive graph of MillerKnoll's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 10% in the twelve months, MillerKnoll shareholders did even worse, losing 35% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 0.5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand MillerKnoll better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with MillerKnoll (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.