Should Value Investors Buy HP (HPQ) Stock?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
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 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.
HP (HPQ) is a stock many investors are watching right now. HPQ is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. HPQ has a P/S ratio of 0.46. This compares to its industry's average P/S of 0.83.
Finally, investors will want to recognize that HPQ has a P/CF ratio of 6.80. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 19.18. Within the past 12 months, HPQ's P/CF has been as high as 8.97 and as low as 4.94, with a median of 6.49.
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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