Is Honeywell a Good Opportunity After 15.8% Drop and Recent Acquisition News?

• If you have ever wondered whether Honeywell International might be a hidden value waiting to be discovered, you are not alone. Now could be a great time to take a closer look.
• The stock price has seen muted movement recently, losing just 0.0% over the past week, but broader trends show a 10.8% dip in the last month and a 15.8% drop for the year-to-date.
• These price moves have come amid headlines focusing on Honeywell's strategic acquisitions and ongoing innovation in automation and sustainable solutions, which have sparked both optimism and fresh debates around future growth. As markets digest this news, some investors are reassessing whether the recent pullback signals an opportunity or simply more volatility ahead.
• With a valuation score of 4 out of 6, Honeywell certainly shows signs of undervaluation in key metrics. Here is a closer look at what those numbers mean and why there may be an even smarter way to gauge value by the end of this article.

Find out why Honeywell International's -11.5% return over the last year is lagging behind its peers.

Approach 1: Honeywell International Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model works by estimating a company’s future cash flows and then discounting them back to today’s value to determine what the business is really worth right now. This method is designed to cut through near-term market noise and provide a clearer perspective on long-term value.

For Honeywell International, the most recent reported Free Cash Flow (FCF) stands at $6.29 Billion. Analyst expectations and projections suggest Honeywell’s FCF is likely to grow modestly, reaching $8.82 Billion by 2035. The forecasts up to 2028 are directly from analysts, while estimates further out are extrapolations. The use of a two-stage Free Cash Flow to Equity model allows for a nuanced assessment that captures near-term analyst insight and more generalized growth assumptions in later years.

Applying this DCF methodology, Honeywell’s estimated intrinsic value is $216.18 per share. With the current market price showing a 12.1% discount to this fair value, the model indicates that the stock is undervalued at today’s levels.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Honeywell International is undervalued by 12.1%. Track this in your watchlist or portfolio, or discover 925 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Honeywell International.

Approach 2: Honeywell International Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is often a go-to metric when evaluating profitable companies, such as Honeywell International, because it directly reflects how much investors are willing to pay today for a dollar of current earnings. This measure offers a straightforward way to assess value, particularly when earnings are steady or growing.

It is important to recognize that a "normal" or "fair" PE ratio is not necessarily the same for every company. Factors like a company's growth prospects and perceived risk play a key role. Rapidly growing businesses or those with stable earnings can justify higher PE ratios, while higher risk or slow growth might warrant a discount.

Honeywell currently trades at 19.68x earnings. For context, the Industrials sector average PE is 12.13x, and its peer group sits even higher at 28.84x. Instead of relying solely on these benchmarks, Simply Wall St applies a proprietary "Fair Ratio." This Fair Ratio, calculated specifically for Honeywell, stands at 27.17x. The Fair Ratio incorporates multiple dimensions, including growth outlook, risks, profit margins, industry context, and market capitalization. This holistic view can provide a more balanced assessment than simply benchmarking against sector or peer averages.

Comparing Honeywell's actual PE of 19.68x to its Fair Ratio of 27.17x, the stock appears to be undervalued relative to what an investor might expect given the company's outlook and fundamentals.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1440 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Honeywell International Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is a simple, powerful tool that allows you to connect your own story or perspective about a company directly to the numbers, from your assumptions about future revenue, earnings, and margins, all the way through to a personalized fair value estimate.

With Narratives, the numbers you see are not just data points but the result of your underlying view of what will drive a company's future. This approach links your thesis, the actual financial forecast, and the derived fair value into one clear picture, helping you move beyond simple ratios or market benchmarks.

Anyone can create and share a Narrative on Simply Wall St's Community page, where millions of investors already use these tools to refine their decision making. With this feature, you can easily see if your fair value for Honeywell International signals it is a buy, hold, or sell when compared to the current market price. Because Narratives update in real time as news or earnings reports become available, you are always equipped with the latest view.

For example, some Honeywell International Narratives currently forecast fair values as high as $290 or as low as $203 per share. This clearly illustrates how different perspectives can lead to different conclusions and helps you find yours.

Do you think there's more to the story for Honeywell International? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com