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Honest Company (HNST)
NASDAQ:HNST
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Honest Company
(NASDAQ:HNST)
49Neutral
Positive Factors
Financial Performance
The company reported results that were ahead of expectations with revenue reaching the highest in company history.
Profitability
Gross margin increased significantly, driven by improvements in the cost structure, including supply chain and product costs.
Revenue Growth
Revenue increased 10.6% with tracked channel growth significantly outperforming category weakness.
Transformation Program
HNST's transformation program continues to gain steam, even in a difficult CPG environment.
Negative Factors
Competition
HNST acknowledged its own weaker performance in the diapers category in Q4 due to increased competition from newer entrants.
Guidance
HNST's guidance looks conservative for 2025, which was viewed as a negative for the stock.
Honest Company (HNST) vs. S&P 500 (SPY)
Market Cap
$529.10M
Dividend YieldN/A
Average Volume (3M)2.30M
Price to Earnings (P/E)―
Beta (1Y)1.42
Revenue Growth9.76%
EPS Growth85.23%
CountryUS
Employees164
SectorConsumer Defensive
Sector Strength91
IndustrySpecialty Retail
Share Statistics
EPS (TTM)-0.06
Shares Outstanding110,229,640
10 Day Avg. Volume1,815,501
30 Day Avg. Volume2,300,559
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.45
Price to Cash Flow (P/CF)-8.10
P/FCF Ratio0.00
Enterprise Value/Market Cap1.27
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit6.70
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$7.40Price Target Upside54.17% 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 MoneyHonest Company makes money by selling its diverse range of products through multiple channels, including direct-to-consumer sales via its e-commerce platform and partnerships with major retailers both online and in physical stores. The company's revenue model is primarily based on product sales, with a focus on high-volume, repeat purchase items like diapers and wipes. Additionally, its beauty and personal care lines contribute significantly to its earnings. Honest Company leverages its brand reputation for safety and sustainability to capture a loyal customer base. Key revenue streams include its baby, personal care, and household product lines, supported by strategic marketing initiatives and collaborations to expand its market reach and customer engagement.
Honest Company Financial Statement Overview
Summary
Honest Company is showing signs of recovery with improvements in revenue growth, gross margins, and cash flow. Despite the positive trajectory, persistent net losses and historical volatility highlight ongoing challenges. The balance sheet is strong with low debt levels, providing a cushion for further strategic investments.Income Statement
The company's revenue growth is positive with a TTM increase of 7.08% compared to the previous year. Gross profit margin improved to 36.9% from 29.2% in 2023, indicating better cost management. However, the net profit margin remains negative at -1.13%, and the company continues to operate at a loss, though losses have narrowed.55
Neutral
Balance Sheet
The company has a solid equity position with a debt-to-equity ratio of 0.18, reflecting low leverage. The equity ratio is strong at 63.98%, suggesting a stable capital structure. However, total liabilities have been decreasing, which is positive for financial health.60
Neutral
Cash Flow
The operating cash flow has improved significantly, with a TTM value of $28.29 million compared to $19.35 million in 2023. Free cash flow has also grown by 59.09%, supporting future investments. The operating cash flow to net income ratio is positive, indicating better cash management.70
Positive
| Breakdown | ||||
| Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 | Dec 2019 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 344.37M | 313.65M | 318.64M | 300.52M | 235.59M | Gross Profit |
| 100.53M | 92.31M | 109.17M | 107.90M | 75.85M | EBIT |
| -38.91M | -49.78M | -36.83M | -13.54M | -31.46M | EBITDA |
| -36.15M | -47.03M | -32.68M | -8.69M | -23.79M | Net Income Common Stockholders |
| -39.24M | -49.02M | -38.68M | -14.47M | -31.08M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 32.83M | 15.17M | 93.18M | 63.68M | 85.02M | Total Assets |
| 201.62M | 240.60M | 272.60M | 240.73M | 234.02M | Total Debt |
| 29.84M | 37.53M | 37.53M | 38.43M | 39.21M | Net Debt |
| -2.98M | 28.01M | -13.26M | 9.17M | 25.67M | Total Liabilities |
| 78.48M | 94.24M | 93.49M | 477.56M | 464.30M | Stockholders Equity |
| 123.14M | 146.36M | 179.11M | -236.82M | -230.28M |
| Cash Flow | Free Cash Flow | |||
| 17.50M | -77.89M | -38.37M | -12.27M | -20.65M | Operating Cash Flow |
| 19.35M | -76.28M | -38.15M | -12.07M | -19.99M | Investing Cash Flow |
| 3.83M | 34.96M | -8.62M | 36.70M | 11.01M | Financing Cash Flow |
| 122.00K | 38.00K | 60.37M | -973.00K | -305.00K |
Honest Company Technical Analysis
Neutral
4.80
Price Trends
4.99
Negative
5.87
Negative
5.05
Negative
Market Momentum
-0.11
Negative
53.42
Neutral
85.51
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HNST, the sentiment is Neutral. The current price of 4.8 is above the 20-day moving average (MA) of 4.51, below the 50-day MA of 4.99, and below the 200-day MA of 5.05, indicating a neutral trend. The MACD of -0.11 indicates Negative momentum. The RSI at 53.42 is Neutral, neither overbought nor oversold. The STOCH value of 85.51 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
65 Neutral | $497.20M | ― | -79.06% | ― | -6.95% | -0.73% | |
64 Neutral | $9.19B | 14.55 | 4.35% | 185.16% | 3.95% | 5.56% | |
53 Neutral | $392.73M | ― | -19.66% | ― | -2.11% | -6.49% | |
51 Neutral | $57.45M | 99.87 | 1.54% | 16.03% | -2.19% | 0.60% | |
50 Neutral | $355.52M | ― | -36.88% | ― | 1.38% | 63.65% | |
49 Neutral | $529.10M | ― | -4.12% | ― | 9.76% | 85.23% | |
38 Underperform | $82.23M | ― | -19.52% | ― | 5.21% | 73.44% |
* Consumer Defensive Sector Average
Performance Comparison
HNST
Honest Company
4.80
1.72
55.84%
BNED
Barnes & Noble Education
10.44
10.24
5120.00%
NHTC
Natural Health Trends
4.99
-0.93
-15.71%
YSG
Yatsen Holding
4.28
-0.21
-4.68%
TDUP
thredUP
4.20
2.47
142.77%
AKA
aka Brands Holding Corp
7.69
-5.56
-41.96%
Honest Company Earnings Call Summary
Earnings Call Date:Feb 26, 2025
(Q4-2024)
| % Change Since: -15.49%|
Next Earnings Date:May 07, 2025
Earnings Call Sentiment Positive
The earnings call highlights The Honest Company's record-breaking financial performance in 2024, with significant revenue and margin growth, along with a successful execution of strategic initiatives. However, there are challenges in the diaper category and increased legal costs impacting operating expenses. The company plans to shift away from its direct-to-consumer channel due to cost inefficiencies.Q4-2024 Updates
Positive Updates
Record Revenue and Gross Margin Expansion
The Honest Company achieved a record annual revenue of $378 million, up 10% year-over-year, and expanded gross margins by 900 basis points to 38%, marking their highest annual revenue and gross margin ever.
Positive Adjusted EBITDA
The company delivered its first full year of positive adjusted EBITDA as a public company, with a full-year positive adjusted EBITDA of $26 million, exceeding their original outlook.
Significant Growth in Key Product Segments
Wipes portfolio velocities were up 17% in Q4 and repeat purchases increased by 26% for the year. The sensitive skin collection nearly doubled in consumption with year-over-year growth of 96%.
Strong Performance in Digital Channels
At Amazon, the largest digital customer, consumption was up 35% in the quarter, driven by baby personal care, wipes, and baby apparel.
Successful Execution of Transformation Pillars
The company made significant advancements in Brand Maximization, Margin Enhancement, and Operating Discipline, driving profitable growth and long-term value creation.
Negative Updates
Challenges in Diaper Category
The diaper category remains the most competitive and was a soft spot for the company in the quarter. The company is committed to bringing meaningful innovation and product performance to this category.
Legal Costs Impact on Operating Expenses
Total expenses increased $11 million in the fourth quarter compared to last year, mainly driven by non-recurring legal costs.
Shifting Away from DTC Channel
The company plans to gradually transition away from Honest.com as a shipping and fulfillment channel due to higher costs, focusing on more efficient distribution models with retail and digital partners.
Company Guidance
During The Honest Company's Q4 2024 earnings call, guidance for 2025 was introduced, projecting revenue growth between 4% and 6% and adjusted EBITDA margin expansion. The company achieved record-high revenue of $378 million for 2024, marking a 10% year-over-year increase, and expanded gross margins by 900 basis points to 38%. Key achievements included a 32% increase in repeat purchase rates and a 20% rise in household penetration since going public in 2021. Notable growth drivers included the Clean Conscious Wipes, which saw a 17% increase in Q4 velocities, and the Sensitive Skin collection, which nearly doubled in consumption. The company's strategic focus on Brand Maximization, Margin Enhancement, and Operating Discipline played a crucial role in these outcomes. Looking ahead, The Honest Company plans to continue leveraging its transformation pillars to drive long-term value creation and intends to gradually pivot away from its own DTC channel in favor of more scalable distribution models.Honest Company Corporate Events
Executive/Board ChangesFinancial Disclosures
Honest Company CFO Retirement and Financial Outlook
Positive
Jan 8, 2025
The Honest Company announced the upcoming retirement of its Chief Financial Officer, Dave Loretta, who will continue in his role until a successor is found. The company credited Loretta with significant improvements in its financial performance, including increased revenue and profitability, and expressed confidence in its future financial positioning.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
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.