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HP Inc HPQ

Morningstar Rating
$29.02 +0.58 (2.02%)
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Company Report

HP Should Stave Off Printing Declines With Modest PC Growth, but Doesn’t Earn a Moat

HP is a legacy technology Titan with poor competitive positioning in our view, but we like its shareholder returns. HP's core markets of PCs and printing offer low growth, slim profitability, and, in our view, don’t have much potential to aid HP in warranting an economic moat. We don’t anticipate HP improving its midcycle growth potential or margin profile, but we do expect it to continue generating heady cash flow and sending nearly all of it back to shareholders between its dividend and repurchase program. Investors able to look past HP’s low growth may find the company’s distributions enticing.

Price vs Fair Value

HPQ is trading at a 5% discount.
Price
$28.43
Fair Value
$24.00
Uncertainty
High
1-Star Price
$28.10
5-Star Price
$26.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

We like HP’s shareholder return program. HP generates heady annual free cash flow and sends the majority of it back to shareholders.

Bears

HP plays in two commoditylike industries that whittle down accounting and economic profits.

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News

Trading Information

Previous Close Price
$28.44
Day Range
$28.4329.10
52-Week Range
$25.2033.89
Bid/Ask
$29.01 / $29.02
Market Cap
$28.74 Bil
Volume/Avg
3.3 Mil / 8.7 Mil

Key Statistics

Price/Earnings (Normalized)
8.63
Price/Sales
0.53
Dividend Yield (Trailing)
3.74%
Dividend Yield (Forward)
3.88%
Total Yield
4.09%

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 U.S. It 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

Competitors

Valuation

Metric
HPQ
XRX
00992
Price/Earnings (Normalized)
8.638.02
Price/Book Value
0.892.16
Price/Sales
0.530.400.24
Price/Cash Flow
7.085.436.78
Price/Earnings
HPQ
XRX
00992

Financial Strength

Metric
HPQ
XRX
00992
Quick Ratio
0.390.800.58
Current Ratio
0.731.120.87
Interest Coverage
6.364.283.46
Quick Ratio
HPQ
XRX
00992

Profitability

Metric
HPQ
XRX
00992
Return on Assets (Normalized)
8.87%3.43%3.00%
Return on Equity (Normalized)
11.62%19.65%
Return on Invested Capital (Normalized)
40.81%6.09%13.57%
Return on Assets
HPQ
XRX
00992
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