The average target price of HNST is 7.7 and suggests 57% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 8.0. This translates into 64% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 5.5. This suggests 13% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

The Honest Company, Inc. manufactures and sells diapers and wipes, skin and personal care, and household and wellness products. The company also offers baby clothing and nursery bedding products. It sells its products through digital and retail sales channels, such as its website and third-party ecommerce sites, as well as brick and mortar retailers. The company was incorporated in 2012 and is headquartered in Los Angeles, California.

The Honest Company, Inc.

Consumer Cyclical

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

HNST reported revenue of USD 389mn in the last 12 months, up 3% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 72% from FY24 to USD -0.02. Market expects EPS to reach USD -0.07 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 37ppts over six months and grown 0ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported very poor EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 1.4% in the last 12 months, up from -10.1% in FY23. 

Historically, HNST has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -0.4%, a growth from -11.4% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to -0.9%, below the peers. The consensus estimate for FY24 for RoCE is -3.4%, again behind the peers. 

Another important profitability metric, return on assets (RoA), amounted to -0.6% in the last 12 months, an increase from -17.7% in FY23. The market analysts predict that RoA will be -2.6% in FY24, again weaker than its peers. 

The Honest Company, Inc. reported a return on equity (RoE) of -1.0% in the last 12 months, up from -29.1% in FY23. The market consensus projects an RoE of -4.2% in FY24, again behind its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.7 in the past several years. This ratio implies a strong shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

HNST has above average trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is usually stable and remains favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to slow historical revenue growth, bleak profitability, negligible return on capital, poor working capital management, inadequate interest coverage, and poor cash flow generation. We note low margin volatility, among the positive credit factors. 

In highly turbulent market conditions, HNST is exceptionally volatile. In other words, the stock will be among the worst-performers in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be critical. 

In normal market circumstances, HNST is exceptionally volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change quite unpredictably. The stock's losses on its worst days (less than 1-5% of the time) will range from critical to immense. 

Based on key historical and expected multiples, the stock is greatly overvalued relative to its peers. Specifically, the stock is 'expensive' on P/E, overvalued on EV/EBITD. 

The Honest Company, Inc.

$ 4.98

2

The Honest Company, Inc.

$ 4.98

2

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

$ 4.98

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