Why Investors Shouldn't Be Surprised By MillerKnoll, Inc.'s (NASDAQ:MLKN) P/E

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 16x, you may consider MillerKnoll, Inc. (NASDAQ:MLKN) as a stock to avoid entirely with its 24.9x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

With its earnings growth in positive territory compared to the declining earnings of most other companies, MillerKnoll has been doing quite well of late. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for MillerKnoll

Keen to find out how analysts think MillerKnoll's future stacks up against the industry? In that case, our free report is a great place to start.

How Is MillerKnoll's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as MillerKnoll's is when the company's growth is on track to outshine the market decidedly.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 14% last year. Although, the latest three year period in total hasn't been as good as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 80% during the coming year according to the four analysts following the company. That's shaping up to be materially higher than the 11% growth forecast for the broader market.

In light of this, it's understandable that MillerKnoll's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From MillerKnoll's P/E?

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that MillerKnoll maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with MillerKnoll, and understanding these should be part of your investment process.

Of course, you might also be able to find a better stock than MillerKnoll. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.