Hewlett Packard: An Undervalued Stock

Feb.15.12 | About: HP Inc. (HPQ)

Hewlett Packard (NYSE:HPQ) is the world's largest computer manufacturer. Last year, when the company said that it would stop producing computers and invest in higher margin industries, the investors panicked so much that the stock lost half of its value overnight. Since then, HP changed its CEO and the new CEO overturned the decision to stop producing computers, however, the company's stock price never recovered. It seems like the investors lost their faith in HP and it will take a while before they return. Currently, HP is an undervalued stock.

In the chart below, you will see HP's stock price movements in the last decade. In the last 10 years, the stock price moved up from $20.70 to $29.08. This indicates a movement of 47%.

Revenues

10 years ago, HPQ's revenue was $11.38 billion. In the last quarter of 2011, the company's total revenue was $31.19 billion. In the last decade, the company has experienced a revenue growth of 170%.

Net Earnings

A decade ago, the company's net earning was $484 million. In the last quarter, the company earned $1.92 billion. In the last decade, the company's earnings grew by 297%.

Cash and Equivalents

In the last 10 years, the company's cash and equivalents grew from $6.98 billion to $12.95 billion. This indicates a growth of 85%.

Book Value

HP's book value grew to $124.91 billion from $33.58 billion in the last decade. This indicates a growth of 272%.

Growth by Metric in the Last Decade


Conclusion

In the last 10 years, the company's price growth was much slower than its revenue, assets, and income growth. HP looks undervalued at its current share price.

Disclosure: I am long HPQ.