What is KNL's Intrinsic value?

Knoll Inc (KNL) Intrinsic Value Analysis

Executive Summary

As of June 16, 2025, Knoll Inc's estimated intrinsic value ranges from $13.06 to $22.96 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $22.96 -8.3%
Discounted Cash Flow (5Y) $17.91 -28.5%
Dividend Discount Model (Multi-Stage) $13.06 -47.8%
Earnings Power Value $13.63 -45.6%

Is Knoll Inc (KNL) undervalued or overvalued?

With the current market price at $25.04, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Knoll Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.2% 3.7%
Equity market risk premium 4.2% 5.2%
Adjusted beta 0.86 0.96
Cost of equity 6.8% 9.2%
Cost of debt 5.3% 5.9%
Tax rate 26.5% 29.0%
Debt/Equity ratio 0.24 0.24
After-tax WACC 6.2% 8.2%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.2% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $1,236 (FY12-2020) to $1,754 (FY12-2030)
  • Net profit margin expansion from 1% to 5%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $18 $1,184M 80.3%
10-Year Growth $23 $1,440M 65.0%
5-Year EBITDA $11 $822M 71.7%
10-Year EBITDA $16 $1,070M 52.8%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.0%
  • Long-term growth rate: 2.0%
  • Fair value: $13.06 (-47.8% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.2% (Low) to 6.8% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $(1) to $(2)
  • Selected fair value: $-1.62 (-106.5% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $68M
Discount Rate (WACC) 8.2% - 6.2%
Enterprise Value $834M - $1,099M
Net Debt $273M
Equity Value $561M - $826M
Outstanding Shares 51M
Fair Value $11 - $16
Selected Fair Value $13.63

Key Financial Metrics

Metric Value
Market Capitalization $1273M
Enterprise Value $1546M
Trailing P/E 0.00
Forward P/E 81.70
Trailing EV/EBITDA 5.80
Current Dividend Yield 91.12%
Dividend Growth Rate (5Y) -12.78%
Debt-to-Equity Ratio 0.24

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 35% $6.89
Discounted Cash Flow (5Y) 29% $4.48
Dividend Discount Model (Multi-Stage) 24% $2.61
Earnings Power Value 12% $1.36
Weighted Average 100% $18.05

Investment Conclusion

Based on our comprehensive valuation analysis, Knoll Inc's weighted average intrinsic value is $18.05, which is approximately 27.9% below the current market price of $25.04.

Key investment considerations:

  • Strong projected earnings growth (1% to 5% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.24)

Given these factors, we believe Knoll Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.