It's been a pretty great week for The Honest Company, Inc. (NASDAQ:HNST) shareholders, with its shares surging 11% to US$3.17 in the week since its latest first-quarter results. Overall the results were a little better than the analysts were expecting, with revenues beating forecasts by 2.4%to hit US$86m. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

After the latest results, the six analysts covering Honest Company are now predicting revenues of US$359.6m in 2024. If met, this would reflect a satisfactory 3.6% improvement in revenue compared to the last 12 months. Losses are predicted to fall substantially, shrinking 54% to US$0.10. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$357.0m and losses of US$0.17 per share in 2024. Although the revenue estimates have not really changed Honest Company'sfuture looks a little different to the past, with a very favorable reduction to the loss per share forecasts in particular.

Even with the lower forecast losses, the analysts lowered their valuations, with the average price target falling 8.1% to US$4.55. It looks likethe analysts have become less optimistic about the overall business. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Honest Company analyst has a price target of US$6.00 per share, while the most pessimistic values it at US$3.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Honest Company's rate of growth is expected to accelerate meaningfully, with the forecast 4.8% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 3.9% p.a. over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.9% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, Honest Company is expected to grow slower than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Honest Company going out to 2026, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 4 warning signs for Honest Company that you should be aware of.

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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.