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1. Company Snapshot

1.a. 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.

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1.b. Last Insights on HNST

The Honest Company's recent performance was driven by several positive factors. The company's Q1 2025 earnings release showcased a 13% year-over-year revenue increase to $97 million, with net income of $3 million and a 170 basis point expansion in gross margin to 39%. Additionally, the appointment of Curtiss Bruce as Chief Financial Officer in May 2025 brought a seasoned finance executive to the role, potentially enhancing the company's financial management. Furthermore, the launch of new and improved Clean Conscious Diapers in July 2025 is expected to enhance the company's product offerings and performance. The mean of analysts' price targets also points to a 40.8% upside in the stock, indicating strong agreement among analysts in raising earnings estimates.

1.c. Company Highlights

2. Honest's Q3 Results: A Mixed Bag with a Focus on Transformation

The company's third-quarter financial performance was marked by a revenue decline of 7% to $93 million, primarily driven by underperformance in diapers and apparel categories. Despite this, the company maintained a healthy balance sheet with $71 million in cash and no debt outstanding. Gross margin in the quarter was 37%, down 140 basis points year-over-year. Earnings per share (EPS) came in at $0.01, beating estimates of -$0.01.

Publication Date: Nov -29

📋 Highlights
  • Revenue Decline:: Q3 revenue fell to $93 million, down 7% YoY, driven by diaper, apparel, and honest.com underperformance.
  • Category Growth:: Wipes and Baby Personal Care grew consumption by 10% and 77% YoY, outpacing their categories by 2% and 75% respectively.
  • Diaper Challenges:: Diapers, contributing 30% of revenue, saw double-digit consumption declines due to retail partner assortment changes and lapped promotions.
  • Strategic Exits:: Exit of Honest.com, apparel, and Canadian markets will reduce revenue by ~20%, with full wind-down expected by 2025.
  • Product Improvements:: New diaper design reduced consumer complaints by 21% YoY, while Amazon diaper sales grew 3% YoY despite market headwinds.

Segment Performance

The wipes and personal care categories continued to show strength, with the Baby Personal Care collection growing consumption by 10% in the quarter, outpacing the category growth of 2%. The diaper category, however, remained a challenge, with consumption down double digits due to assortment simplification at the largest brick-and-mortar retailer and the lapping of large customer-specific promotional events.

Transformation 2.0 Initiatives

The company is driving growth through its Transformation 2.0 program, which aims to simplify the business, focus on core categories, and drive margin enhancement. The program involves exiting non-strategic categories, optimizing cost structure, and rightsizing SG&A. The exit of honest.com as a direct-to-consumer fulfillment channel, apparel partnership, and direct sales to Canadian retailers is expected to wind down by the end of the year.

Valuation and Outlook

With a P/S Ratio of 0.77 and EV/EBITDA of 14.18, the stock appears to be reasonably valued. However, the revised revenue outlook for 2025, in the range of -3% to flat, and adjusted EBITDA outlook, in the range of $21 million to $23 million, may put pressure on the stock. Analysts estimate next year's revenue growth at -7.9%. The company's focus on simplifying its business and driving margin enhancement is expected to drive growth in 2026.

Key Takeaways

The Honest brand continues to show strength in core categories, particularly in wipes and Baby Personal Care. The Transformation 2.0 program is expected to drive long-term value and growth for shareholders. While the current macroeconomic environment remains uncertain, the company's efforts to simplify its business and drive margin enhancement are expected to yield positive results in the future.

3. NewsRoom

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Envestnet Asset Management Inc. Sells 203,329 Shares of The Honest Company, Inc. $HNST

Nov -27

Source: defenseworld.net

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The Honest Company: Reducing Complexity

Nov -15

Source: seekingalpha.com

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My Honest Opinion of Oklo Stock

Nov -06

Source: fool.com

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The Honest Company, Inc. (HNST) Q3 2025 Earnings Call Transcript

Nov -06

Source: seekingalpha.com

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Bet on 5 Top-Ranked Stocks With Rising P/E

Nov -05

Source: zacks.com

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My Honest Take on SoundHound AI's Latest Earnings Report

Nov -01

Source: fool.com

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The Honest Company, Inc. (NASDAQ:HNST) Given Consensus Rating of “Moderate Buy” by Analysts

Oct -30

Source: defenseworld.net

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Halper Sadeh LLC Encourages The Honest Company, Inc. Shareholders to Contact the Firm to Discuss Their Rights

Oct -22

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.65%)

6. Segments

Diapers and Wipes

Expected Growth: 4.5%

The Honest Company's Diapers and Wipes segment growth of 4.5% is driven by increasing demand for eco-friendly and sustainable baby care products, expanding online presence, and growing brand awareness among millennial parents seeking natural and organic alternatives. Additionally, strategic partnerships and targeted marketing efforts contribute to the segment's growth.

Skin and Personal Care

Expected Growth: 4.8%

The Honest Company's 4.8% growth in Skin and Personal Care is driven by increasing consumer demand for natural and organic products, expansion into new distribution channels, and a strong online presence. Additionally, the company's focus on sustainability, transparency, and eco-friendliness resonates with the growing demographic of environmentally conscious consumers.

Household and Wellness

Expected Growth: 5.2%

The Honest Company's Household and Wellness segment growth of 5.2% is driven by increasing consumer demand for eco-friendly and sustainable products, expanding online presence, and strategic partnerships. Additionally, the company's focus on product innovation, particularly in the baby and beauty categories, has contributed to the segment's growth.

7. Detailed Products

Diapers

Eco-friendly diapers made with sustainable materials and free of chlorine, fragrances, and latex.

Baby Wipes

Gentle and effective wipes for cleaning baby's skin, made with plant-based ingredients and free of harsh chemicals.

Cleaning Products

Plant-based cleaning products that are free of harsh chemicals, toxins, and artificial fragrances.

Personal Care Products

Natural and effective personal care products, including shampoo, conditioner, and body wash, free of harsh chemicals and toxins.

Baby Care Products

Natural and gentle baby care products, including lotions, oils, and creams, free of harsh chemicals and toxins.

Wellness Products

Natural supplements and vitamins designed to support overall health and wellness.

Household Essentials

Eco-friendly household essentials, including paper products, trash bags, and cleaning tools.

8. The Honest Company, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for The Honest Company, Inc. is medium due to the presence of alternative products in the market, but the company's focus on natural and eco-friendly products differentiates it from competitors.

Bargaining Power Of Customers

The bargaining power of customers for The Honest Company, Inc. is low due to the company's strong brand reputation and customer loyalty, making it difficult for customers to negotiate prices.

Bargaining Power Of Suppliers

The bargaining power of suppliers for The Honest Company, Inc. is medium due to the company's dependence on a few key suppliers, but the company's scale and reputation help to mitigate this risk.

Threat Of New Entrants

The threat of new entrants for The Honest Company, Inc. is high due to the growing demand for natural and eco-friendly products, making it an attractive market for new entrants.

Intensity Of Rivalry

The intensity of rivalry for The Honest Company, Inc. is high due to the presence of established competitors in the market, and the company's need to continuously innovate and differentiate itself to maintain market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 19.52%
Debt Cost 3.95%
Equity Weight 80.48%
Equity Cost 13.46%
WACC 11.60%
Leverage 24.25%

11. Quality Control: The Honest Company, Inc. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Honest

A-Score: 4.0/10

Value: 4.7

Growth: 6.0

Quality: 6.4

Yield: 0.0

Momentum: 4.5

Volatility: 2.7

1-Year Total Return ->

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Stock-Card
1stdibs

A-Score: 3.9/10

Value: 8.4

Growth: 4.7

Quality: 5.2

Yield: 0.0

Momentum: 1.0

Volatility: 4.0

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Stock-Card
Big 5 Sporting Goods

A-Score: 3.7/10

Value: 9.8

Growth: 0.6

Quality: 3.6

Yield: 5.0

Momentum: 1.5

Volatility: 2.0

1-Year Total Return ->

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Stock-Card
Office Depot

A-Score: 3.3/10

Value: 6.6

Growth: 3.8

Quality: 2.9

Yield: 0.0

Momentum: 4.0

Volatility: 2.3

1-Year Total Return ->

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Stock-Card
1800Flowers

A-Score: 2.6/10

Value: 9.4

Growth: 1.0

Quality: 2.7

Yield: 0.0

Momentum: 0.5

Volatility: 2.0

1-Year Total Return ->

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Stock-Card
A.K.A. Brands

A-Score: 2.3/10

Value: 7.2

Growth: 3.4

Quality: 2.2

Yield: 0.0

Momentum: 0.5

Volatility: 0.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

2.81$

Current Price

2.81$

Potential

-0.00%

Expected Cash-Flows