Eric Dutram

Bull of the Day: Hewlett Packard (HPQ)

by

April 01, 2013 |
HPQ

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The post-crash environment has been very tough for makers of computers and peripherals. Competition has been extremely intense, and many consumers have shifted from traditional PCs to tablets and smart phones as their main sources of computing activities.

With this backdrop, many firms have faltered, but a few have managed to persevere despite the immense challenges. One such company that is starting to find its way again in the space is undoubtedly Hewlett Packard (HPQ - Analyst Report).

The company is usually regarded as a member of the ‘old guard’ of the PC world, and was best known for its home use products. However, the company has begun to reinvent itself and find new opportunities, namely in the printing and enterprise groups.

These segments, while not quickly growing, have helped to stabilize the company’s floundering personal systems division and give hope for the firm in both the short and long term periods.

Estimate Picture

Analysts are starting to take note of the trend too, as the vast majority of analysts have recently revised their estimates upward for both the current quarter, current year, and next year periods. The magnitude of the revision has also been pretty good, suggesting that analysts are expecting pretty good things out of the company going forward.

This widespread optimism over HPQ has helped to propel the company to a Zacks Rank of 1 or ‘Strong Buy’, along with a great Industry Rank. These factors suggest that the stock could be poised to continue to move higher in the near term, especially if analysts continue to stay bullish on the firm ahead of the next earnings report in May.

Other Factors

If the estimates picture isn’t enough, consider that HPQ has incredible momentum to start 2013. In the first quarter of the year, the stock added more than 65%, suggesting to many that a bottom has finally been hit and that better days will continue to be ahead for this stock.

The stock is also trading at low valuations, even with the huge surge as of late. Price/Sales, and Price/Cash Flow metrics are both below half of the industry average, while the company currently has a 2.2% yield as well.

While that 2.2% yield might not sound that impressive, it is far better than many other big tech names in the space, and it is on par with the S&P 500 as well. So, even if trouble does hit this stock in the near future, this solid dividend should help to alleviate some concerns of more risk adverse investors.

Bottom Line

Yes, HPQ has had some significant trouble in the past and its stock has lost a big chunk of its value since the 2008 crash. However, the firm is starting to turn things around, moving aggressively into other sectors and stabilizing its bottom line.

This has been a winning strategy for the firm so far in 2013, and if the analyst estimate trend is any guide, it could continue into the second quarter as well. That is why now could still be a great time to get in on this top Ranked stock in order to ride the turnaround story in this tech giant a bit higher.

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