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Honest Company (HNST)
NASDAQ:HNST
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Honest Company
(NASDAQ:HNST)
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Rating:58Neutral
Price Target:
$4.00
▲(8.70% Upside)
The Honest Company's stock score is primarily driven by its solid earnings call performance, highlighting positive net income and strong digital growth. However, financial performance challenges, bearish technical indicators, and high valuation weigh down the overall score.
Positive Factors
Revenue Growth
Consistent revenue growth indicates expanding market reach and product adoption, supporting long-term business sustainability.
Digital Retail Expansion
Strong online performance enhances market presence and leverages digital channels for future growth, crucial in the evolving retail landscape.
Balance Sheet Strength
Low leverage provides financial stability and flexibility, enabling the company to invest in growth opportunities without significant financial strain.
Negative Factors
Diaper Business Decline
Declining sales in a key product category could impact overall revenue and market position if not addressed, posing a risk to sustained growth.
Tariff Impact
Increased tariffs can affect cost structures and margins, potentially reducing profitability and competitive pricing ability in the long term.
Negative Operating Cash Flow
Persistent negative operating cash flow can strain financial resources, limiting the company's ability to fund operations and growth initiatives.
Honest Company (HNST) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$412.81M
Dividend YieldN/A
Average Volume (3M)3.43M
Price to Earnings (P/E)65.5
Beta (1Y)1.66
Revenue Growth9.62%
EPS GrowthN/A
CountryUS
Employees164
SectorConsumer Defensive
Sector Strength42
IndustrySpecialty Retail
Share Statistics
EPS (TTM)0.03
Shares Outstanding111,269,490
10 Day Avg. Volume3,581,189
30 Day Avg. Volume3,428,663
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)N/A
P/FCF RatioN/A
Enterprise Value/Market Cap1.27
Enterprise Value/Revenue1.35
Enterprise Value/Gross Profit3.45
Enterprise Value/Ebitda30.30
Forecast
1Y Price Target
$6.31Price Target Upside71.47% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering5
Honest Company Business Overview & Revenue Model
Company DescriptionThe 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.
How the Company Makes MoneyThe Honest Company generates revenue primarily through the sale of its products across various channels, including direct-to-consumer e-commerce, retail partnerships, and wholesale distribution. Key revenue streams include the sale of baby care products, personal care items, and household cleaning products. The company has established partnerships with major retailers such as Target and Amazon, enhancing its market reach and visibility. Additionally, Honest Company leverages subscription services for consumers who prefer regular deliveries of its products, which provides a stable source of recurring revenue. The brand's commitment to transparency and sustainability has attracted a loyal customer base, contributing to its overall earnings.
Honest Company Earnings Call Summary
Earnings Call Date:Aug 06, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Nov 05, 2025
Earnings Call Sentiment Positive
The Honest Company demonstrated solid financial performance with consecutive positive net income quarters, a record-high gross margin, and strong growth in digital retail channels. However, the company faces challenges with its diaper business decline and tariff impacts. Despite these challenges, the positive developments in revenue growth, gross margin improvement, and loyalty metrics contribute to a generally positive outlook.Q2-2025 Updates
Positive Updates
Positive Net Income
The Honest Company delivered a positive net income of $4 million for the second consecutive quarter, an increase of $8 million year-over-year.
Record Gross Margin
The company reported its highest gross margin as a public company at 40.4%, up 210 basis points from the previous year.
Revenue and Consumption Growth
The Honest Company achieved a quarterly revenue of $93 million and a year-to-date revenue growth of 6%. Consumption grew 6% for the quarter, driven by unit growth of 8% and increased velocities up 21%.
Expansion in Digital Retailer
Consumption growth of 26% was observed at the company's largest digital retailer, indicating strong online performance.
Loyalty Metrics Improvement
The buy rate increased by 600 basis points, the repeat rate by 94 basis points, and household penetration by 77 basis points year-over-year.
Flushable Wipes Success
Flushable wipes have shown strong performance, contributing to an overall distribution growth of 11% in the quarter.
Negative Updates
Diaper Business Decline
The diaper business experienced low double-digit consumption declines due to assortment simplification at a major brick-and-mortar retailer.
Tariff Impact
The company faced a 1 to 2 percentage point impact from tariffs in Q2, with an expected increase to 3 to 4 percentage points in Q3 and a total gross tariff exposure of $8 million for 2025.
Apparel Portfolio Challenges
While there is optimism about the Fam Jams apparel line, specifics on its current size and projected contribution remain unclear.
Company Guidance
During The Honest Company's second quarter 2025 earnings call, key financial metrics were highlighted, including a revenue of $93 million and an impressive gross margin of 40%, up 210 basis points. The company reported a positive net income of $4 million, marking an $8 million year-over-year improvement, and achieved an adjusted EBITDA margin of 8%. Year-to-date, revenue grew by 6% with net income increasing by $13 million compared to the previous year. Consumption growth was reported at 6% for the quarter, with unit growth at 8% and velocities up 21%. The Honest brand's strong digital presence was emphasized with a 26% consumption growth at the largest digital retailer. Additionally, the company saw significant growth in their fragrance-free baby personal care items, up 65%. The Honest Company reaffirmed its full-year 2025 financial outlook, projecting net revenue growth of 4% to 6% year-over-year and an adjusted EBITDA range of $27 million to $30 million.Honest Company Financial Statement Overview
Summary
The Honest Company shows revenue growth and a strong equity position with low leverage. However, it struggles with profitability and cash flow generation, as evidenced by negative net profit margin and free cash flow. Improved EBITDA margin indicates better cost management, but consistent net losses remain a concern.Income Statement
The Honest Company showed a positive revenue growth trend of 2.92% in the TTM (Trailing-Twelve-Months) compared to the previous year. Despite this growth, the company has faced challenges with profitability, as seen in the negative net profit margin and EBIT margin, indicating ongoing operational inefficiencies. However, the improved EBITDA margin in TTM suggests better cost management efforts compared to previous periods.65
Positive
Balance Sheet
The balance sheet reveals a strong equity position with a high equity ratio of 67.99% in TTM, indicating financial stability and low leverage with a debt-to-equity ratio of 0.06. This suggests the company is using less debt to finance its operations, reducing financial risk. The return on equity remains negative due to the company's net losses, highlighting profitability issues.70
Positive
Cash Flow
Cash flow analysis shows a concerning decline in free cash flow, which turned negative in TTM, reflecting cash outflows exceeding inflows. The operating cash flow to net income ratio is negative, indicating poor cash generation relative to net income. Despite these challenges, the company has maintained cash reserves, supporting liquidity needs.50
Neutral
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 389.78M | 378.34M | 344.37M | 313.65M | 318.64M | 300.52M |
| Gross Profit | 152.59M | 144.66M | 100.53M | 92.31M | 109.17M | 107.90M |
| EBITDA | 17.36M | 2.96M | -36.15M | -47.03M | -32.68M | -8.69M |
| Net Income | 6.48M | -6.12M | -39.24M | -49.02M | -38.68M | -14.47M |
Balance Sheet | ||||||
| Total Assets | 249.03M | 247.39M | 201.62M | 240.60M | 272.60M | 240.73M |
| Cash, Cash Equivalents and Short-Term Investments | 72.08M | 75.44M | 32.83M | 15.17M | 93.18M | 63.68M |
| Total Debt | 17.51M | 21.74M | 29.84M | 37.53M | 37.53M | 38.43M |
| Total Liabilities | 62.00M | 73.09M | 78.48M | 94.24M | 93.49M | 477.56M |
| Stockholders Equity | 187.03M | 174.31M | 123.14M | 146.36M | 179.11M | -236.82M |
Cash Flow | ||||||
| Free Cash Flow | -6.00M | 1.01M | 17.50M | -77.89M | -38.37M | -12.27M |
| Operating Cash Flow | -5.42M | 1.54M | 19.35M | -76.28M | -38.15M | -12.07M |
| Investing Cash Flow | -582.00K | -530.00K | 3.83M | 34.96M | -8.62M | 36.70M |
| Financing Cash Flow | 41.49M | 41.60M | 122.00K | 38.00K | 60.37M | -973.00K |
Honest Company Technical Analysis
Negative
3.68
Price Trends
4.07
Negative
4.48
Negative
5.03
Negative
Market Momentum
-0.11
Positive
31.80
Neutral
5.65
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HNST, the sentiment is Negative. The current price of 3.68 is below the 20-day moving average (MA) of 3.89, below the 50-day MA of 4.07, and below the 200-day MA of 5.03, indicating a bearish trend. The MACD of -0.11 indicates Positive momentum. The RSI at 31.80 is Neutral, neither overbought nor oversold. The STOCH value of 5.65 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HNST.
Honest Company Risk Analysis
Honest Company disclosed 73 risk factors in its most recent earnings report. Honest Company reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Honest Company Peers Comparison
UnderperformOutperform
Sector (62)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
63 Neutral | $1.10B | -18.05 | -94.46% | ― | -10.39% | 14.92% | |
58 Neutral | $412.81M | 65.48 | 4.09% | ― | 9.62% | ― | |
52 Neutral | $833.37M | -11.29 | -23.18% | ― | 11.67% | 31.55% | |
51 Neutral | $104.65M | -3.84 | -23.45% | ― | 7.67% | 71.96% | |
50 Neutral | $326.24M | -0.17 | ― | ― | 1.38% | 63.65% | |
50 Neutral | $50.20M | 147.65 | 1.21% | 18.35% | -2.07% | -61.05% | |
62 Neutral | $20.33B | 14.63 | -3.31% | 3.23% | 1.93% | -12.26% |
* Consumer Defensive Sector Average
HNST
Honest Company
3.55
0.06
1.72%
FLWS
1-800 Flowers
4.55
-3.09
-40.45%
LE
Lands' End
14.61
-1.54
-9.54%
BNED
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9.58
0.47
5.16%
BWMX
Betterware de Mexico
13.18
1.18
9.83%
BARK
BARK Inc Class A
0.81
-0.77
-48.73%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.