How Do We Tell if Honeywell International (HON) Is Overvalued?

Honeywell International may be overvalued with poor growth indicators, but the 24 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $185.0 to $265.0 per share, for an average of $218.63. At today's price of $194.89, Honeywell International is trading -10.86% away from its average target price, suggesting there is an analyst consensus of some upside potential.

Honeywell International Inc. is an American publicly traded, multinational conglomerate headquartered in Charlotte, North Carolina. The large-cap Industrials company is based in Charlotte, NC. Honeywell International has offered a 2.11% dividend yield over the last 12 months.

Honeywell International has a trailing twelve month P/E ratio of 26.77, compared to an average of 20.49 for the Industrials sector. Based on its EPS guidance of 10.03, the company has a forward P/E ratio of 19.43. Based on the average annual growth rate of Honeywell International's historical and projected earnings per share, which is 3.4%, the company's PEG ratio is 7.87. This suggests that these shares are overvalued.

Furthermore, Honeywell International is likely overvalued compared to its book value, since its P/B ratio of 8.15 is higher than the sector average of 3.78. The company's shares are currently trading 189.37% above their Graham number, implying that they are overvalued in terms of earnings and book value.

Why would analysts be giving such an overvalued stock a good rating? It's possible that analysts are looking beyond common valuation metrics and taking into account the company's responsible use of debt to operate its business. You can see for yourself in the financial summary table below:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $36,905 $32,678 $34,343 $35,397
Revenue Growth n/a -11.45% 5.1% 3.07%
Gross Margins 33.52% 32.03% 15.34% 15.55%
Gross Margins Growth n/a -4.45% -52.11% 1.37%
Operating Margins 11.7% 10.23% -5.08% -6.73%
Operating Margins Growth n/a -12.56% -149.66% -32.48%
Earnings Per Share $8.64 $6.86 $8.09 $7.44
EPS Growth n/a -20.6% 17.93% -8.03%
Diluted Shares (MM) 711 697 685 668
Free Cash Flow (MM) $6,058 $5,302 $5,143 $4,508
FCF Growth n/a -12.48% -3.0% -12.35%
Capital Expenditures (MM) $839 $906 $895 $766
Net Debt / EBITDA 0.87 1.27 1.12 1.46
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.