Loss-Making The Honest Company, Inc. (NASDAQ:HNST) Expected To Breakeven In The Medium-Term

With the business potentially at an important milestone, we thought we'd take a closer look at The Honest Company, Inc.'s (NASDAQ:HNST) future prospects. The Honest Company, Inc. manufactures and sells diapers and wipes, skin and personal care, and household and wellness products. The US$762m market-cap company posted a loss in its most recent financial year of US$39m and a latest trailing-twelve-month loss of US$4.2m shrinking the gap between loss and breakeven. As path to profitability is the topic on Honest Company's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Honest Company

According to the 8 industry analysts covering Honest Company, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2024, before generating positive profits of US$2.8m in 2025. The company is therefore projected to breakeven just over a year from now. How fast will the company have to grow each year in order to reach the breakeven point by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 63% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Honest Company's growth isn’t the focus of this broad overview, however, keep in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one aspect worth mentioning. Honest Company currently has no debt on its balance sheet, which is rare for a loss-making growth company, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Honest Company, so if you are interested in understanding the company at a deeper level, take a look at Honest Company's company page on Simply Wall St. We've also compiled a list of important factors you should further examine:

1. Valuation: What is Honest Company worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Honest Company is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Honest Company’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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

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.