Honest Company (HNST) AI Stock Analysis

• Market Cap: $278.36M
• Dividend Yield: N/A
• Average Volume (3M): 1.97M
• Price to Earnings (P/E): 40.6
• Beta (1Y): 1.51
• Revenue Growth: 3.89%
• EPS Growth: N/A
• Country: US
• Employees: 164
• Sector: Consumer Defensive
• Sector Strength: 42
• Industry: Specialty Retail
• EPS (TTM): 0.01
• Shares Outstanding: 111,790,670
• 10 Day Avg. Volume: 2,025,447
• 30 Day Avg. Volume: 1,966,201
• PEG Ratio: 1.33
• Price to Book (P/B): 3.99
• Price to Sales (P/S): 1.84
• P/FCF Ratio: 687.14
• Enterprise Value/Market Cap: 0.77
• Enterprise Value/Revenue: 0.56
• Enterprise Value/Gross Profit: 1.44
• Enterprise Value/Ebitda: 10.93
• 1Y Price Target: $3.83
• Price Target Upside: 53.82% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 7
• EPS Forecast (FY): 0.05
• Revenue Forecast (FY): $341.98M

• Rating: 52 Neutral
• Price Target: $2.50 ▲(0.40% Upside)

The score is held back most by renewed TTM cash burn and a weakening top line, despite improved profitability and a stronger, less-levered balance sheet. Technicals remain bearish with the price below major moving averages, and valuation looks demanding at ~42x earnings. Earnings call factors are mixed: strong performance in key categories and continued net income, but lowered guidance and revenue/diaper pressures limit confidence in near-term acceleration.

Positive Factors

Margin Recovery & Profitability

The company’s TTM shift to modest net profitability and a ~39% gross margin reflects durable improvements in pricing, mix, or cost control. Sustained higher gross margins increase resilience to volume shocks and provide more scope to fund marketing, R&D, or margin-enhancing initiatives over the medium term.

Conservative Balance Sheet / Lower Leverage

Sharp reduction in debt and a solid equity base materially reduce refinancing and liquidity risk. A less-levered balance sheet gives management flexibility to invest in core categories, absorb restructuring costs, and withstand demand cycles without immediate external financing, supporting longer-term stability.

Strength in Wipes & Personal Care; Amazon Growth

Strong, above-category consumption gains in wipes and personal care and accelerating Amazon penetration indicate structural demand and channel traction. Dominant performance in replenishable categories and a growing e‑commerce partner can sustain repeat purchases and scale efficiencies over multiple quarters.

Negative Factors

Negative Operating and Free Cash Flow

A material TTM reversal to negative operating and free cash flow indicates working capital or execution pressures that can’t be ignored. Persistent cash burn constrains reinvestment, limits runway for strategic initiatives, and may force external financing or asset sales, raising medium-term execution risk.

Revenue Decline & Diaper Category Weakness

Declining top-line and double-digit erosion in diapers—a core replenishable category—signals a structural demand or competitive problem. Loss of volume reduces scale and drives gross margin deleverage; continued share weakness or retailer SKU cuts would undermine long-term revenue stability and unit economics.

Transformation 2.0 Execution Risk & Restructuring Costs

Planned exits and significant one-time restructuring costs create short-to-medium-term disruption risk to revenue and guidance. Successful execution is required to realize annualized savings; mishandling could worsen retailer relationships, supply continuity, or brand momentum and delay intended margin and focus benefits.

Honest Company Business Overview & Revenue Model

Company Description

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.

How the Company Makes Money

The 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 Financial Statement Overview

Summary

Margins and profitability have improved (TTM modest net profitability and stronger gross margin) and leverage is conservative with sharply lower debt, but TTM cash flow has deteriorated materially (negative operating and free cash flow) and revenue is slightly down, which raises sustainability risk.

Income Statement

Profitability has improved materially versus prior years, with TTM (Trailing-Twelve-Months) turning modestly profitable (about 1.7% net margin) and positive operating profit, versus losses in 2024 and deep losses in 2022–2023. Gross margin has also strengthened to ~39% in TTM (Trailing-Twelve-Months) from ~29% in 2022–2023. The key weakness is growth: revenue is slightly down in TTM (Trailing-Twelve-Months) (-1.7%) after mid-to-high single-digit growth in 2023–2024, suggesting demand/traffic softness or a tougher competitive backdrop.

Balance Sheet

Leverage looks conservative and improving, with total debt falling sharply to ~$6.5M in TTM (Trailing-Twelve-Months) from ~$21.7M in 2024 and ~$29.8M in 2023, and a low debt-to-equity level. Equity is solid at ~$190M in TTM (Trailing-Twelve-Months), supporting balance sheet resilience. The main watch-out is that returns are still modest (TTM (Trailing-Twelve-Months) return on equity is only ~3.8%) following multiple years of negative returns, indicating the turnaround is still early.

Cash Flow

Cash generation has weakened in the most recent period: TTM (Trailing-Twelve-Months) shows negative operating cash flow (~-$21.0M) and negative free cash flow (~-$21.6M), a clear deterioration from positive free cash flow in 2023–2024. While the business has recently returned to accounting profitability, the mismatch versus negative operating cash flow raises execution risk around working capital and/or reinvestment needs. The positive factor is that 2023–2024 demonstrated the model can produce positive cash flow, but TTM (Trailing-Twelve-Months) reverses that progress.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	383.12M	378.34M	344.37M	313.65M	318.64M	300.52M
Gross Profit	148.68M	144.66M	100.53M	92.31M	109.17M	107.90M
EBITDA	19.53M	2.96M	-36.15M	-40.85M	-32.68M	-8.69M
Net Income	7.07M	-6.12M	-39.24M	-49.02M	-38.68M	-14.47M
Balance Sheet
Total Assets	241.54M	247.39M	201.62M	240.60M	272.60M	240.73M
Cash, Cash Equivalents and Short-Term Investments	71.45M	75.44M	32.83M	15.17M	93.18M	63.68M
Total Debt	6.48M	21.74M	29.84M	37.53M	37.53M	38.43M
Total Liabilities	51.35M	73.09M	78.48M	94.24M	93.49M	477.56M
Stockholders Equity	190.19M	174.31M	123.14M	146.36M	179.11M	-236.82M
Cash Flow
Free Cash Flow	-21.62M	1.01M	17.50M	-77.89M	-38.37M	-12.27M
Operating Cash Flow	-21.01M	1.54M	19.35M	-76.28M	-38.15M	-12.07M
Investing Cash Flow	-609.00K	-530.00K	3.83M	34.96M	-8.62M	36.70M
Financing Cash Flow	39.63M	41.60M	122.00K	38.00K	60.37M	-973.00K

Honest Company Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 2.49
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

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 2.49 is below the 20-day moving average (MA) of 2.64, below the 50-day MA of 2.68, and below the 200-day MA of 3.94, indicating a bearish trend. The MACD of -0.07 indicates Positive momentum. The RSI at 33.99 is Neutral, neither overbought nor oversold. The STOCH value of 31.20 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HNST.

Honest Company Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
BWMX	73 Outperform	$616.10M	11.77	79.76%	8.47%	-7.03%	1.04%
Sector *	62 Neutral	$20.33B	14.63	-3.31%	3.23%	1.93%	-12.26%
LE	53 Neutral	$482.10M	42.47	5.17%	―	-8.47%	―
HNST	52 Neutral	$278.36M	40.62	4.36%	―	3.89%	―
FLWS	51 Neutral	$303.05M	-1.38	-67.22%	―	-8.07%	-2206.16%
BARK	50 Neutral	$156.66M	-4.46	-33.59%	―	-7.61%	-18.41%
BNED	49 Neutral	$297.97M	-1.47	―	―	1.38%	63.65%

Honest Company Corporate Events

Honest Company Launches Strategic Transformation Initiative

On November 5, 2025, The Honest Company announced the launch of its Transformation 2.0: Powering Honest Growth, a strategic initiative aimed at enhancing simplicity, focus, and profitability. The plan involves exiting lower margin, non-strategic categories and channels, such as Honest.com fulfillment and apparel, and retail and online stores in Canada. The company expects restructuring costs between $25 million to $35 million by the first quarter of 2027, with anticipated annualized benefits of $8 million to $15 million starting in 2026. The initiative is expected to streamline operations and strengthen the company’s market position.

The most recent analyst rating on (HNST) stock is a Hold with a $6.00 price target. To see the full list of analyst forecasts on Honest Company stock, see the HNST Stock Forecast page.