Hp Inc (NYSE: HPQ)

Sector: Technology Industry: Computer Hardware CIK: 0000047217
Market Cap 21.10 Bn
P/B -60.99
P/E 8.34
P/S 0.38
ROIC (Qtr) 33.58
Div Yield % 6.55
Rev 1y % (Qtr) 4.16
Total Debt (Qtr) 9.67 Bn
Debt/Equity (Qtr) -27.94

About

HP Inc., commonly referred to as HP, is a prominent player in the technology industry, specializing in personal computing and other digital access devices, imaging and printing products, and related solutions and services. The company operates in three reportable segments: Personal Systems, Printing, and Corporate Investments. HP's main business activities involve the design, manufacture, and distribution of a wide range of products and services, including commercial and consumer desktops, notebooks, workstations, thin clients, retail point-of-sale...

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Price action

Investment thesis

Bull case

  • Healthy cash reserves of 3.71B provide 4.38x coverage of short-term debt 845M, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 33.06B provides 3.42x coverage of total debt 9.67B, indicating robust asset backing and low credit risk.
  • Robust free cash flow of 2.80B exceeds capital expenditure of 897M by 3.12x, indicating strong organic growth funding capability.
  • Retained earnings of (2.03B) represent substantial 5.86x of equity (346M), indicating strong internal capital generation.
  • Cash reserves of 3.71B provide solid 0.92x coverage of other non-current liabilities 4.04B, indicating strong liquidity.

Bear case

  • Operating cash flow of 3.70B barely covers its investment activities of (1.18B), with a coverage ratio of -3.14, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (1.18B) provide weak support for R&D spending of 1.60B, which is -0.73x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of 3.70B provides thin coverage of dividend payments of (1.09B) with a -3.40 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 3.71B provide limited coverage of acquisition spending of (50M), which is -74.10x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Free cash flow of 2.80B represents just -1400x of debt issuance (2M), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Peer comparison

Companies in the Computer Hardware
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 ANET Arista Networks, Inc. 164.72 Bn 49.07 19.50 0.00 Bn
2 DELL Dell Technologies Inc. 86.37 Bn 16.20 0.83 31.24 Bn
3 WDC Western Digital Corp 60.34 Bn 23.73 5.03 4.68 Bn
4 STX Seagate Technology Holdings plc 58.67 Bn 34.25 6.14 4.99 Bn
5 SNDK Sandisk Corp 34.41 Bn -19.78 4.42 1.35 Bn
6 PSTG Pure Storage, Inc. 21.84 Bn 167.52 6.27 0.23 Bn
7 HPQ Hp Inc 21.10 Bn 8.34 0.38 9.67 Bn
8 SMCI Super Micro Computer, Inc. 17.45 Bn 22.01 0.83 4.78 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.67 2.06
EV to Cash from Ops. EV/CFO 7.53 -0.65
EV to Debt EV to Debt 2.88 56.37
EV to EBIT EV/EBIT 8.77 2.89
EV to EBITDA EV/EBITDA 6.80 -1.74
EV to Free Cash Flow [EV/FCF] EV/FCF 9.94 -7.44
EV to Market Cap EV to Market Cap 1.32 7.64
EV to Revenue EV/Rev 0.50 78.30
Price to Book Value [P/B] P/B -60.99 -28.73
Price to Earnings [P/E] P/E 8.34 6.39
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 2.32 1.25
Dividend Payout Ratio % Div Payout % (Qtr) 43.30 12.30
Dividend per Basic Share Div per Share (Qtr) 1.16 0.27
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 39.09 7.93
Interest Coverage Int. cover (Qtr) 6.27 -105.42
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -51.52 -11.38
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 13.89 867.36
Dividend Growth (1y) % Div 1y % (Qtr) 3.67 4.71
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -6.89 -189.41
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -12.01 -40.76
EBIT Growth (1y) % EBIT 1y % (Qtr) -16.87 -117.00
EBT Growth (1y) % EBT 1y % (Qtr) -18.63 -116.68
EPS Growth (1y) % EPS 1y % (Qtr) -5.65 -70.06
FCF Growth (1y) % FCF 1y % (Qtr) -11.31 712.64
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -3.60 34.90
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.32 0.80
Cash Payout Ratio Cash Payout (Qtr) 0.24 0.06
Cash Ratio Cash Ratio (Qtr) 0.13 7.26
Current Ratio Curr Ratio (Qtr) 0.77 13.59
Debt to Equity Ratio Debt/Equity (Qtr) -27.94 -3.57
Interest Cover Ratio Int Coverage (Qtr) 6.27 -105.42
Times Interest Earned Times Interest Earned (Qtr) 6.27 -105.42
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 7.40 -629.92
EBIT Margin % EBIT Margin % (Qtr) 5.74 -683.67
EBT Margin % EBT Margin % (Qtr) 4.83 -687.58
Gross Margin % Gross Margin % (Qtr) 20.60 34.79
Net Profit Margin % Net Margin % (Qtr) 4.60 -692.43