Honeywell International Inc (HON)

Conclusion

Honeywell International is a US industrial company active in industrial automation, building automation, and energy and sustainability solutions, including the UOP process technology business. At 229 USD on 9 November 2026, it has a market capitalisation of 72.6 billion USD and an enterprise value of 83.0 billion USD.

The verdict is overvalued. The fair value band runs from 120.83 to 181.25 USD, with a midpoint of 151.04 USD and a margin of safety of -34.0% at the current price. Today's price-to-earnings ratio of 10.3 and enterprise value to EBITDA of 6.9 sit below their ten-year medians of 11.7 and 9.2, but price to free cash flow of 56.9 is far above its median of 12.7. The discounted cash flow gives 49.66 USD per share at a discount rate of 9.3%, while the fair value from historical multiples is 252.43 USD. The reverse DCF implies growth of 23.2% a year, against revenue growth of 2.8% a year over five years and free cash flow per share growth of 2.5% a year.

What holds the case up is the balance sheet and returns: an Altman Z-score of 4.27, net debt to EBITDA of 0.86, and a return on invested capital of 26.8% against a WACC of 8.7%. Earnings are backed by cash, with five-year free cash flow conversion of 93.6%, and the company beat estimates in all eight of the last quarters. What would weaken it is short-term liquidity (a current ratio of 0.96), trailing free cash flow conversion of only 18.1%, and a price that already assumes growth far above what the business has delivered.

Financial health

Financial strength is green, held up by the Altman Z-score, net debt to EBITDA and interest coverage, with only the current ratio neutral. The current ratio is 0.96 and the quick ratio 0.76 at September 2026, so short-term liabilities are covered mainly by inventory and receivables rather than by cash. Net debt to EBITDA is 0.86 on a trailing basis, debt to equity is 0.74, and interest coverage is 8.7 times. The Altman Z-score of 4.27 falls in the safe zone; the Altman model was designed for manufacturers, and this industrial group is close enough to that profile for the reading to be meaningful. Insolvency risk: low, about 1.3% by the estimate of the Ohlson model over one to two years, based on the December 2025 statements.

Earnings quality

Earnings quality is green. Free cash flow conversion is 93.6% over five years, although it is only 18.1% on a trailing basis, so recent cash generation lags reported profit. The accrual ratio is -2.25%, which means reported earnings are backed by cash rather than accounting entries. Stock-based compensation is 0.76% of revenue, and free cash flow after it is 1.02 billion USD. The share count has fallen by 2.0% a year over five years, which points to buybacks. The Piotroski score is 6 out of 9 and the Beneish M-score is -2.66, a reading that is unlikely to indicate manipulation. The company beat estimates in all eight of the last quarters, by an average of 6.6%. Estimates for the current year have been revised up by 1.8% over 90 days, but estimates for next year have been revised down by 1.3%, with 11 downward revisions against 7 upward in the last 30 days.

Profitability

Profitability is green, driven by return on invested capital and net margin. The gross margin is 37.7% against a ten-year median of 34.8%, and the net margin is 21.0% against a median of 15.0%. The operating margin is 14.5%, below its median of 17.8%, which is the main soft spot. Return on invested capital is 26.8%, with a five-year median of 19.7%, against a WACC of 8.7%, giving a return on invested capital minus WACC of 18.1%. Return on equity of 31.5% is flattered by leverage: the December 2025 DuPont split shows a net margin of 12.6%, an asset turnover of 0.51 and an equity multiplier of 5.33 times. The operating margin has moved by 7.8 percentage points over the year, which signals some volatility beneath the headline figures.

Growth

Growth is green, but the underlying rates are modest. Revenue has a compound growth rate of 1.8% over three years, 2.8% over five years and -0.3% over ten years. Earnings per share grew 0.4% a year over three years, 1.8% over five years and 2.0% over ten years. Free cash flow per share grew 8.5% a year over three years, 2.5% over five and 4.3% over ten. Revenue grew in seven of the last ten years. The forward view is more demanding: consensus expects next-year earnings per share growth of 16.7%, a figure well above anything the company has delivered over the past decade.

Valuation

Valuation is red. The verdict is overvalued, with a margin of safety of -34.0% at a price of 229 USD against a fair value band of 120.83 to 181.25 USD. Against their ten-year medians, the price-to-earnings ratio is 10.3 against 11.7, a discount of 12.3%; enterprise value to EBITDA is 6.9 against 9.2, a discount of 25.1%; price to book is 3.2 against 3.6, a discount of 9.3%; price to sales is 2.2 against 1.9, a premium of 16.6%; and price to free cash flow is 56.9 against 12.7, a premium of 347.1%. The discounted cash flow gives 49.66 USD per share at a discount rate of 9.3%, with about 53.0% of its value in the terminal value. The fair value from historical multiples is 252.43 USD. The reverse DCF implies growth of 23.2% a year, against five-year revenue growth of 2.8%. The dividend yield is 3.6%, but dividends paid are 202.0% of free cash flow, and the forward yield is 1.3%. The fair value figures are an order of magnitude built on fixed assumptions, not a price target.

Risks

The weakest numbers are the current ratio of 0.96, which leaves little room if receivables or inventory weaken; trailing free cash flow conversion of 18.1%, which would pressure the dividend, since payouts already exceed free cash flow at 202.0%; and the 16.7% expected earnings growth next year, where downward estimate revisions could mean the market's expectations fall further. The valuation carries its own risk: a price 34.0% above the fair value midpoint would need sustained growth well beyond the 2.8% revenue rate. The company does not report its debt maturity schedule in this data, and revenue by segment is not available, so refinancing risk and the contribution of each business cannot be assessed. The analysis rests on statements to 30 September 2026 and an insolvency estimate based on December 2025 figures.