Despite Progress, Hewlett-Packard Is Fully Valued
Computer giant's quarter was outstanding due to margin improvements.
Hewlett-Packard’s (HWP) performance over the past few quarters has been outstanding, and the firm reported yet another strong quarter late Wednesday. But with the bulk of HP's improved results already reflected in the stock's valuation, there are probably better places for most tech investors' money at this point.
Perhaps the most impressive feat Hewlett-Packard accomplished in its July quarter was improved profitability--specifically in its computing segment. For some time now, HP has relied on its printing and imaging unit to supply the bulk of its profits. In the May-ending quarter, for example, printing and imaging accounted for more than 75% of the firm's total operating profits, while only contributing 44% to sales. The problem with this was that HP's computing segment only produced operating margins between 3% and 4%, which wasn't anything to write home about.
Jeremy Lopez does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.