Today we're going to take a closer look at Large-Cap Technology company HP, whose shares are currently trading at $34.45. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
HP Is a Speculative Stock:
HP Inc. provides personal computing and other digital access devices, imaging and printing products, and related technologies, solutions, and services worldwide. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 30.01. In contrast, HP has a trailing 12 month P/E ratio of 12.3 based on its earnings per share of $2.81.
HP has moved 15.9% over the last year compared to 28.2% for the S&P 500 -- a difference of -12.3%. HP has a 52 week high of $39.8 and a 52 week low of $27.43.
The Company's Revenues Are Declining:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $58,472 | $58,756 | $56,638 | $63,460 | $62,910 | $53,718 |
| Operating Margins | 7% | 7% | 6% | 8% | 7% | 6% |
| Net Margins | 9% | 5% | 5% | 10% | 5% | 6% |
| Net Income (M) | $5,327 | $3,152 | $2,815 | $6,541 | $3,132 | $3,263 |
| Net Interest Expense (M) | -$818 | -$1,354 | -$231 | $2,209 | -$235 | -$519 |
| Depreciation & Amort. (M) | $528 | $744 | $789 | $785 | $780 | $850 |
| Diluted Shares (M) | 1,634 | 1,524 | 1,420 | 1,220 | 105 | 1,000 |
| Earnings Per Share | $3.26 | $2.07 | $1.98 | $5.36 | $2.98 | $3.26 |
| EPS Growth | n/a | -36.5% | -4.35% | 170.71% | -44.4% | 9.4% |
| Avg. Price | $19.69 | $17.43 | $17.13 | $28.41 | $35.05 | $34.42 |
| P/E Ratio | 5.97 | 8.38 | 8.61 | 5.25 | 11.61 | 10.46 |
| Free Cash Flow (M) | $3,982 | $3,983 | $3,736 | $5,827 | $3,672 | $2,962 |
| CAPEX (M) | $546 | $671 | $580 | $582 | $791 | $609 |
| EV / EBITDA | 7.21 | 5.61 | 6.12 | 5.72 | 8.0 | 9.56 |
| Total Debt (M) | $5,987 | $5,137 | $6,217 | $8,679 | $11,408 | $9,842 |
| Net Debt / EBITDA | 0.19 | 0.13 | 0.32 | 0.71 | 1.55 | 1.56 |
| Current Ratio | 0.85 | 0.8 | 0.79 | 0.76 | 0.75 | 0.73 |
HP's financial statements include several red flags such as declining revenues and a flat capital expenditure trend, weak operating margins with a stable trend, and positive cash flows. Additionally, the firm has not enough current assets to cover current liabilities because its current ratio is 0.73. On the other hand, the company has healthy leverage levels working in its favor. Furthermore, HP has flat EPS growth.
