The technology giant HP Inc. (HPQ - Get Rating) is scheduled to release its fourth quarter 2023 financial results on November 21. Wall Street expects the company to report earnings of $0.90 per share for the quarter, indicating a 6.2% year-over-year improvement. Its revenue for the quarter is expected to come in at $13.90 billion.

Before delving into HPQ’s fundamentals, let’s take a look at the recent developments that position the company well for growth.

On November 7, HPQ announced a strategic partnership with INDO-MIM (Indo-MIM Private Limited), a foremost player in Metal Injection Molding (MIM) and additive manufacturing powder. The collaboration signifies a pivotal stride in advancing metal additive manufacturing technology, broadening its applications across diverse industries.

By leveraging INDO-MIM’s expertise and market presence, HPQ could strengthen its foothold in the burgeoning additive manufacturing sector, driving revenue growth and market share expansion. Moreover, the combined synergies are poised to position HPQ as a frontrunner in the dynamic landscape of advanced manufacturing technologies.

Furthermore, on October 10, HPQ approved an increase to the planned dividend to $1.1024 per share, signifying a 5% surge from the preceding dividend. The balance is slated for redistribution to shareholders through strategic share repurchases, underscoring HPQ’s commitment to delivering enhanced value to its investor base.

HPQ has increased its dividends for 12 consecutive years. It pays a $1.10 per share dividend annually, which translates to a 3.89% yield on the current price level. Its four-year average dividend yield is 3.17%, and its dividend payouts have grown at a 14.2% CAGR over the past three years.

Shares of HPQ have gained 6% over the past month to close the last trading session at $28.31.

Here are the financial aspects of HPQ that could influence its performance in the near term:

Recent Financials Look Compelling

For the third quarter that ended July 31, 2023, HPQ’s cash inflow from operating activities increased 147.7% year-over-year to $976 million. Its free cash flow grew 214% from the year-ago value to $0.9 billion. Moreover, the company’s non-GAAP net earnings and non-GAAP EPS came in at $859 million and $0.86 for the quarter, respectively.

In addition, as of July 31, 2023, HPQ’s total current assets stood at $17.46 billion while total assets amounted to $36.63 billion.

Impressive Historical Growth

Over the past three years, HPQ’s normalized net income increased at a CAGR of 2.5% while its EPS grew at a CAGR of 9.6%. In addition, the company’s total assets and levered free cash flow rose at respective CAGRs of 2.3% and 13.5%, during the same period.

Upbeat Analyst Estimates

The consensus revenue estimate of $13.97 billion for the fiscal 2024 first quarter ending January 2024 reflects a 1% year-over-year improvement. Likewise, the consensus EPS estimate of $0.85 for the current quarter exhibits a 13.2% rise from the previous year.

Discounted Valuation

In terms of forward non-GAAP P/E, HPQ is trading at 8.57x, 61.6% lower than the industry average of 22.33x. Its forward EV/Sales of 0.69x is 73.4% lower than the 2.60x industry average. Moreover, HPQ’s forward Price/Sales of 0.52x is 79.7% lower than the 2.56x industry average.

Higher-Than-Industry Profitability

HPQ’s trailing-12-month EBIT margin of 7.62% is 62.5% higher than the industry average of 4.69%. Also, the stock’s trailing-12-month net income margin of 4.27% is 141.4% higher than the 1.77% industry average. Furthermore, its trailing-12-month asset turnover ratio of 1.44x is 132.3% higher than the industry average of 0.62x.

POWR Ratings Show Promise

HPQ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. HPQ has a B grade for Value, justified by its lower-than-industry valuation. In addition, the stock has a B grade for Growth, consistent with its sound past growth record.

HPQ is ranked #3 in the 38-stock B-rated Technology – Hardware industry. Click here to access HPQ’s Stability, Momentum, Quality, and Sentiment ratings.

Bottom Line

HPQ’s partnership with INDO-MIM drives advancements in metal additive manufacturing, broadening growth opportunities. Utilizing INDO-MIM’s expertise could bolster HPQ’s industry position. The increased annual dividend and share repurchases also highlight the company’s commitment to enhancing shareholder value and fostering positive corporate growth.

Furthermore, considering HPQ’s robust growth history and discounted valuation, it could be wise to buy HPQ ahead of its upcoming earnings release.

How Does HP Inc. (HPQ) Stack Up Against Its Peers?

While HPQ has an overall grade of A, equating to a Strong Buy rating, you may also check out these other A-rated stocks within the Technology – Hardware industry: Vtech Holdings Limited (VTKLY - Get Rating), Daktronics, Inc. (DAKT - Get Rating) and TransAct Technologies Incorporated (TACT - Get Rating). For exploring more A-rated Technology – Hardware stocks, click here.

What To Do Next?

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HPQ shares fell $0.21 (-0.74%) in premarket trading Monday. Year-to-date, HPQ has gained 8.22%, versus a 19.18% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...

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