Is HNI Stock Offering Value After 2024 Declines and Strong DCF Upside?

• Wondering if HNI is quietly becoming a value pick while the market looks elsewhere? Let us break down whether the current price really reflects the company behind the ticker.
• The stock is up 1.9% over the last week and 4.2% over the past month, yet it is still down 15.2% year to date and 23.7% over the last year, even after gaining 64.7% over three years and 31.2% over five. That mix of gains and pullbacks suggests the market may be rethinking HNI's long term prospects.
• Recent headlines around HNI have focused on its positioning in the commercial furniture and workplace solutions market, including product innovation and ongoing integration of past acquisitions. At the same time, broader conversations about office utilization and hybrid work are influencing how investors think about demand for HNI's core offerings.
• Against that backdrop, HNI currently scores a perfect 6/6 on our valuation checks. This indicates it screens as undervalued across every metric we use. Next we will walk through those valuation approaches one by one, then finish with a more holistic way of thinking about what HNI might really be worth.

Find out why HNI's -23.7% return over the last year is lagging behind its peers.

Approach 1: HNI Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth today by projecting the cash it can generate in the future and then discounting those cash flows back to their present value. For HNI, this is done using a 2 Stage Free Cash Flow to Equity approach.

HNI generated about $179.9 million of free cash flow over the last twelve months. Analysts provide detailed forecasts for the next few years, and beyond that Simply Wall St extrapolates those estimates, assuming more moderate growth over time. Under this framework, HNI’s free cash flow is projected to reach roughly $359.0 million by 2035, with the model discounting each year’s cash flow back to today in dollar terms.

Adding these discounted cash flows together yields an estimated intrinsic value of about $141.0 per share. Compared with the current market price, this implies HNI is trading at roughly a 70.3% discount, which suggests the market is pricing in far weaker cash generation than the model assumes.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests HNI is undervalued by 70.3%. Track this in your watchlist or portfolio, or discover 918 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 HNI.

Approach 2: HNI Price vs Earnings

For consistently profitable companies like HNI, the price to earnings ratio is a practical way to gauge valuation because it links what investors pay directly to the profits the business is generating today. In general, faster growing and lower risk companies tend to have a higher PE multiple, while slower or more uncertain businesses tend to trade on lower multiples to compensate investors for that added risk.

HNI currently trades on a PE of about 13.6x, which is well below both the Commercial Services industry average of roughly 23.0x and the peer average near 19.7x. To move beyond simple comparisons, Simply Wall St uses a Fair Ratio, which is the PE multiple it would expect for HNI given its earnings growth outlook, margins, industry, market cap, and company specific risks. For HNI, that Fair Ratio is about 23.0x.

Because the Fair Ratio incorporates business quality and risk rather than just comparing HNI to a broad peer group, it gives a more tailored view of what the stock might reasonably trade at. With the current PE of 13.6x sitting well below the 23.0x Fair Ratio, this framework points to HNI appearing undervalued on an earnings basis.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your HNI Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework that lets you attach a clear story about HNI’s future to the numbers you care about, like its fair value, revenue, earnings, and margins. A Narrative connects three things in one place: your view of the business, a financial forecast built from that view, and a resulting fair value that you can compare to today’s share price to consider whether HNI might be a buy, hold, or sell. Narratives are available on Simply Wall St’s Community page, where millions of investors share and refine their perspectives, and they update dynamically as new information such as earnings reports or major news is released. For HNI, for example, one investor might build a Narrative that emphasizes wellness focused workspaces, efficiency gains, and a fair value near 73 dollars, while a more cautious investor could focus on hybrid work risks, tariffs, and housing headwinds and land closer to 60 dollars, giving you a clear range of reasoned possibilities to weigh against the current price.

Do you think there's more to the story for HNI? 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