The Honest Company, Inc. ($HNST) Earnings (Q2 FY22)

 The Honest Company, Inc. ($HNST) Earnings and Opinion:


The Honest Company is a company in the Consumer Cyclical sector and operates in the Specialty Retail industry. The company manufactures and sells diapers and wipes, skin and personal care, and household and wellness products. The Honest Company was incorporated in 2012 and is currently headquartered in Los Angeles, California. The company made its trading debut in May of 2021.

The Honest Company Earnings Results:

  • Revenues of $78M beating expectations of $76M
  • Diapers/Wipes revenue of $52M beating expectations of $48M
  • Skin & Personal Care revenue of $23M missing expectations of $25M
  • Home & Wellness revenue of $3M beating expectations of $2M
  • Gross Profit of $24M missing expectations of $25M
  • Adjusted EBITDA of -$5M missing expectations of -$3M
  • EPS of -$0.11 missing expectations of -$0.09
Opinion:
The Honest Company is currently moving higher today after reporting earnings before the market opened this morning. The company had a solid beat on revenues, but had some challenges which led to a wider-than-expected loss for the quarter. The stock has been beat down and has become a penny stock ever since its IPO last year, when the stock was initially offered for $16 a share. I think this company was a part of the hot IPO market last year, in which most companies that initially offered last year gained a lot of momentum but have since fallen back to earth. The EPS and Adjusted EBITDA both missed expectations which contributed to the wider than expected loss. However, company guidance for revenues was in line with consensus estimates for the fiscal year. They adjusted the EBITDA metric to guide a wider loss than consensus was expecting. It is apparent that this company is going through some difficult times, and I bet a lot of it has to do with them able to get inventory. Diving deeper into the valuation, the P/S ratio looks decent at 1.18. However, some things that stand out to me is negative revenue growth, but that will probably correct itself when inventory levels get back to reasonable levels. The Current Ratio is solid at 3.86 and the debt is at good levels and manageable for a small company like Honest. It will be interesting to see when profitability actually hits, but for now I would stay away from this company until we can see real results from a solid quarter. I want to see how they can perform given no challenging issues and supply levels normal. For now, I am staying away from this one and putting my money elsewhere.


*Information from Yahoo Finance, Consensus Gurus, CMLVIZ

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