When Should You Buy Knoll, Inc. (NYSE:KNL)?

Knoll, Inc. (NYSE:KNL), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Knoll’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Knoll

What is Knoll worth?

According to my valuation model, Knoll seems to be fairly priced at around 4.1% below my intrinsic value, which means if you buy Knoll today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $17.27, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Knoll’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Knoll?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for Knoll. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? KNL’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on KNL, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Knoll at this point in time. For instance, we've identified 4 warning signs for Knoll (1 is a bit concerning) you should be familiar with.

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This article by Simply Wall St is general in nature. 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.
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