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Are Investors Undervaluing HP (HPQ) Right Now?

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Zacks Equity Research
·2 min read
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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is HP (HPQ). HPQ is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 9.42, which compares to its industry's average of 26.99. Over the last 12 months, HPQ's Forward P/E has been as high as 10.12 and as low as 5.09, with a median of 8.30.

We also note that HPQ holds a PEG ratio of 1.74. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. HPQ's industry currently sports an average PEG of 3.04. HPQ's PEG has been as high as 5.84 and as low as 1.57, with a median of 3.76, all within the past year.

Finally, we should also recognize that HPQ has a P/CF ratio of 9.69. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. HPQ's current P/CF looks attractive when compared to its industry's average P/CF of 19.18. Within the past 12 months, HPQ's P/CF has been as high as 9.69 and as low as 5.04, with a median of 7.69.

Value investors will likely look at more than just these metrics, but the above data helps show that HP is likely undervalued currently. And when considering the strength of its earnings outlook, HPQ sticks out at as one of the market's strongest value stocks.


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