Morningstar

HP Inc HPQ

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Stock XNYS Rating as of
$35.41 −1.44 (3.91%)
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As of Delayed Price Closed

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HP Earnings: PC Recovery Becoming More Visible; Raising Our Fair Value Estimate

Eric Compton

No-moat HP reported OK fiscal third-quarter earnings, which had similar themes to the previous quarter. The recovery in PC-related revenue continued, while the printing business remained under pressure. As we adjust our forecasts, we are increasing our fair value estimate to $32 from $31, largely driven by slightly higher PC growth assumptions as we give a bit more credit for growth driven by the upcoming PC refresh cycle. We went into earnings viewing the stock as slightly overvalued (roughly 15%), and with shares down roughly 4% after hours (we think largely driven by weaker growth and margins in printing) in combination with our 3% fair value raise, we now view shares as approximately fairly valued.

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Price vs Fair Value

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HPQ is trading at a 144% premium.
Price
$35.41
Fair Value
$89.00
Uncertainty
Medium
1-Star Price
$24.30
5-Star Price
$69.80
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

HP generates steady free cash flow and returns this cash to shareholders via dividends and buybacks. High cash flow and low future expectations are not a bad combination.

Bears

HP’s core industries, PCs and printers, are low growth and low margin. It is hard to get excited about this business mix or know where future upside could come from.

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News

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Trading Information

Previous Close Price
$36.85
Day Range
$35.11–36.08
52-Week Range
$25.22–39.52
Bid/Ask
$35.00 / $35.71
Market Cap
$34.11 Bil
Volume/Avg
10.0 Mil / 7.5 Mil

Key Statistics

Price/Earnings (Normalized)
10.54
Price/Sales
0.66
Dividend Yield (Trailing)
3.11%
Dividend Yield (Forward)
3.11%
Total Yield
6.63%

Company Profile

HP (formerly Hewlett-Packard) is a behemoth in the PC and printing markets. It has focused on these markets since it exited IT infrastructure in 2015 with the split from Hewlett Packard Enterprise. HP focuses on the commercial market, but maintains sales of consumer devices and printers. The firm has a broad and global customer base, with only one third of sales coming from the US. HP completely outsources manufacturing and relies heavily on channel partners for its sales and marketing.
Sector
Technology
Industry
Computer Hardware
Stock Style Box
Mid Value
Total Number of Employees
58,000
Website
https://www.hp.com

Competitors

Valuation

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Metric
HPQ
DELL
00992
Price/Earnings (Normalized)
 10.5416.6016.10
Price/Book Value
 ——3.10
Price/Sales
 0.660.960.32
Price/Cash Flow
 8.3710.478.39
Price/Earnings
HPQ
DELL
00992

Financial Strength

Metric
HPQ
DELL
00992
Quick Ratio
 0.370.400.56
Current Ratio
 0.710.720.87
Interest Coverage
 8.083.512.61
Quick Ratio
HPQ
DELL
00992

Profitability

Metric
HPQ
DELL
00992
Return on Assets (Normalized)
 11.41%6.39%3.03%
Return on Equity (Normalized)
 ——21.77%
Return on Invested Capital (Normalized)
 49.19%27.44%16.60%
Return on Assets
HPQ
DELL
00992

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