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Are Investors Undervaluing HP (HPQ) Right Now?

Zacks Equity Research

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company to watch right now is HP (HPQ). HPQ is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 9.40. This compares to its industry's average Forward P/E of 15.64. Over the past year, HPQ's Forward P/E has been as high as 12.60 and as low as 8.40, with a median of 10.46.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. HPQ has a P/S ratio of 0.53. This compares to its industry's average P/S of 1.03.

Finally, investors should note that HPQ has a P/CF ratio of 7.04. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 11.33. Over the past year, HPQ's P/CF has been as high as 8.52 and as low as 5.29, with a median of 6.76.

These figures are just a handful of the metrics value investors tend to look at, but they help show that HP is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, HPQ feels like a great value stock at the moment.


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