HP Inc.: Too Cheap To Ignore, Insiders Agree

Summary

• Director Bennett purchased $748K of HP Inc. shares last week as the stock significantly underperformed indices in 2020.
• I expect the stock price to increase significantly as it is picked by the Insider Outperformance Formula and historical insider purchases saw strong returns.
• The recent Xerox acquisition offer and anticipated buybacks amounting to 60% of its shares outstanding indicate that the stock indeed is significantly undervalued.
• My conservative DCF model implies a 55% upside from today's levels ($25.51 vs $16.50). HP Inc., a market leader in PCs and printers, is a steal at these prices.

On June 2th, an insider purchase of HP Inc. (NYSE:HPQ) shares by director Robert R. Bennett got filed with the SEC. The insider purchased $748K worth of shares at $14.95, which is 38% lower compared to Xerox's (XRX) $24/share offer made in February this year to acquire HP. HP Inc. got highlighted by my Insider Outperformance Formula which picks out the winning insider stocks, which is a first positive indicator. I decided to perform an analysis to see whether the stock is undervalued, which will be the main purpose of this article. I found 4 reasons why HPQ is significantly undervalued at this price. In fact, just like the insider, I anticipate a strong recovery over the coming months and, therefore, decided to include it in Insider Opportunities' model portfolio.

(Source: Robbe Delaet via Tradingview.com)

HP Inc. company description

Since 2015, HP Inc. became the new name for the Hewlett-Packard Company, as Hewlett Packard Enterprise Company (HPE) (its cloud computing business) got spun off in a separate company. The part which is left, HP Inc., is a leading laptop, desktop, and printing manufacturer. HPQ is a company that is strongly focused to generate shareholder value. They returned $9.1 bln to shareholders last year (a staggering 38% of its current market cap), the dividend yields a solid 4.2% and they beat EPS consensus in 17 out of the past 17 quarters. Its business is divided into two segments: personal systems and print.

Personal systems division: market leadership with a focus on revenue growth

Personal systems generates 66% of HPQ's revenues and 36% of operating income and is primarily active in the US and Europe. HPQ shares market leadership in the personal computers ("PC") market with Lenovo Group (OTCPK:LNVGY), both having more than 20% market share which is growing sequentially. HP is particularly

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, but may initiate a long position in HPQ over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.