Today I will examine HP Inc’s (NYSE:HPQ) latest earnings update (31 October 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of HPQ’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. Check out our latest analysis for HP
Did HPQ perform worse than its track record and industry?
I like to use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This enables me to assess various companies on a more comparable basis, using the most relevant data points. For HP, its latest earnings (trailing twelve month) is $2,526.0M, which, against the prior year’s figure, has declined by -5.25%. Given that these values may be relatively nearsighted, I’ve created an annualized five-year figure for HP’s earnings, which stands at $2,185.0M. This means that despite the fact that earnings growth was negative against the prior year, over time, HP’s earnings have been increasing on average.
What’s enabled this growth? Let’s see if it is merely a result of an industry uplift, or if HP has experienced some company-specific growth. In the past few years, HP grew bottom-line, while its top-line declined, by effectively managing its costs. This has caused to a margin expansion and profitability over time. Looking at growth from a sector-level, the US tech industry has been growing its average earnings by double-digit 14.10% in the past year, and a less exciting 6.53% over the past couple of years. This shows that whatever tailwind the industry is enjoying, HP has not been able to reap as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies are profitable, but have unpredictable earnings, can have many factors influencing its business. I recommend you continue to research HP to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for HPQ’s future growth? Take a look at our free research report of analyst consensus for HPQ’s outlook.
2. Financial Health: Is HPQ’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 October 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.