HP INC. (HPQ): what the price requires
The current priced-in claim for HP INC. (HPQ) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/HPQ
Headline
| Field | Value |
|---|---|
| Ticker | HPQ |
| Company | HP INC. |
| Current price | $24.61/sh |
| Composition | Personal Systems 70% / Printing 30% / Corporate Investments 0% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 2.0% |
| Operating margin today | 4.9% |
| Margin compression implied | -2.9pp |
| Multiple paid | 11x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 8.5% cost of capital with 4% terminal growth over a 5-year stage.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.25σ |
| cohort percentile (of 177 peers) | 11 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by earnings-power and relative-multiple value. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | — | 0 | — |
| Earnings | 0.68x | 3 | justifies |
| Relative | 0.43x | 2 | justifies |
| Growth | 1.45x | 2 | expensive |
Families that justify the price: Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.5%); the inversion above states its own rate.
Per-Model Detail (n=7)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $225.33 | 0.11x | no | FCF base $3.9B, growth 6% (input: historical growth), terminal g 4.0%, WACC 6.5%, 6yr projection |
| DCF Exit Multiple | Growth | $59.76 | 0.41x | no | Exit EV/EBITDA: 7.2x / 9.2x / 11.2x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $53.47 | 0.46x | yes | P/E 20.36x (blended: static sector reference 28x + trailing (TTM) 9x), scenarios: 17.0x / 20.4x / 23.7x (bear / base = reference held flat / bull), EV/EBITDA 15.67x |
| Simple DDM | Growth | $12.81 | 1.92x | yes | DPS $1.18, g=0.0% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3% |
| Two-Stage DDM | Growth | $24.89 | 0.99x | yes | Stage 1: 7% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | — | — | no | — |
| Two-Stage Excess Return | Asset | — | — | no | — |
| Discounted Future Market Cap | Growth | $26.16 | 0.94x | no | Rev $57.4B, growth 6% (input: historical growth; tapered), Terminal P/S: 0.3x / 0.4x / 0.5x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $32.52 | 0.76x | no | EPS $2.71, growth 7% (input: historical EPS growth), PEG=1.26 (Fair) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $75.36 | 0.33x | no | Normalized EBIT (5y avg op income, one-time charges added back) $4.18B × (1−9%) / WACC 6.5% → EPV (no growth) |
| Residual Income | Asset | — | — | no | — |
| Graham Number | Asset | — | — | no | — |
| EV/EBITDA Relative | Relative | $62.74 | 0.39x | yes | EBITDA $3.26B × sector EV/EBITDA 20.0x |
| FCF Yield | Earnings | $36.42 | 0.68x | yes | FCF $3779.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $30.77 | 0.80x | yes | SBC-adj FCF $3.29B (FCF $3.78B − SBC $0.48B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $51.52 | 0.48x | yes | EPS $2.71 × (8.5 + 2×7.1%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $372.43 | 0.07x | no | Revenue $57.42B × sector P/S 6.0x |
| PEG Fair Value | Relative | $28.83 | 0.85x | no | EPS $2.71 × (PEG 1.5 × growth 7.1% (input: historical EPS growth)) → PE 10.6x |
| Earnings Yield | Earnings | $29.30 | 0.84x | no | EPS $2.71 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $6.8b |
| Net debt / NOPAT (after-tax) | 2.73x |
| Net debt / operating income (pre-tax) | 2.49x |
| Interest coverage | 6.5x |
| Share count CAGR (buyback) | -3.4% |
| Burning cash | no |
Bullet Takeaways
- HP runs two very different businesses under one ticker: a large, low-margin Personal Systems unit that sells PCs ($10.2 billion in fiscal Q2 2026, up 13%) and a smaller, higher-margin Printing unit ($4.2 billion, flat) whose supplies are a recurring-revenue annuity.
- The biggest near-term risk is input costs: HP flagged rising memory and storage prices that could pressure operating margins in the second half of fiscal 2026, squeezing a PC business that already runs on thin margins.
- Watch the AI PC refresh cycle, which drove AI PCs to 44% of shipments in the quarter, against the printing installed base, where the 10-K shows supplies revenue declining on a shrinking installed base.
Bull Case
What a standard valuation overlooks about HP is that the cheap, commodity-looking PC business is being carried by a quiet annuity. Printing supplies, the ink and toner that customers reorder for years after buying a printer, generate the bulk of HP's profit at margins far above the hardware that seeds them. The 10-K shows the mechanics plainly, describing supplies revenue moving with the installed base and usage, which is to say HP earns on consumption long after the sale. A model that prices HP as a low-margin box maker misses that a meaningful share of its earnings is recurring and high-margin.
The Personal Systems side is enjoying a genuine cyclical tailwind. Fiscal Q2 2026 revenue rose 9% to $14.4 billion, with Personal Systems up 13% to $10.2 billion and its segment operating profit up 30%, driven by AI PC demand and a Windows 11 refresh cycle. AI PCs reached 44% of shipments in the quarter, and they carry higher prices and richer configurations than the commodity machines they replace. A refresh cycle plus a mix shift toward premium AI units is exactly the combination that lifts a PC maker's margins above its historical floor.
The valuation and capital return are the rest of the case. At roughly 11 times operating income, HP trades at a level so low it is supported even if operating profit were to decline a few percent a year. The company generates substantial cash, guiding fiscal 2026 free cash flow to $2.8 to $3.0 billion, and it has been shrinking its share count about 3.4% a year through buybacks. On a low and falling share count, a steady dividend and aggressive repurchase compound per-share value even without much top-line growth. The bull case is a cash machine priced for stagnation, with a printing annuity, a cyclical PC upgrade, and a buyback all working in its favor.
Bear Case
The valuation methods disagree on HP, and the disagreement points to why it is cheap. The earnings-power and peer-multiple lenses support the current price, but the asset-based view has little to anchor on, and the growth lens reads the stock as expensive, which is simply the market saying it expects no growth here. That is the honest read of two structurally challenged businesses. The conservative methods are pricing decline, and the burden is on the bull to show why decline does not happen.
The printing annuity that underpins the bull case is itself eroding. HP's own 10-K reports that supplies net revenue decreased 3.4% primarily due to decline in the installed base and usage, and that printer unit volume fell 4.2% on demand softness. A recurring-revenue stream that shrinks each year is a melting ice cube, not a moat; the high margins are real, but the base they sit on is contracting as offices print less and the installed base ages out. Without printer placements to refill the funnel, the supplies annuity declines structurally.
The near-term pressure is on the PC margins the bull case celebrates. HP flagged rising input costs, particularly memory and storage, that could pressure operating margins in the second half of fiscal 2026, and the 10-K acknowledges that sales prices can decline through discounts, a change in or mix of products and services and competitive promotional programs. Personal Systems is a brutally competitive, low-margin business; a spike in memory prices that cannot be fully passed through compresses the thin operating margin directly, and the current company-wide margin near 5% leaves little room. Add net debt of roughly $6.8 billion, and the bear case is a cheap stock that is cheap for cause: a declining printing annuity, a cyclically peaking PC cycle facing a cost squeeze, and a multiple that already assumes the business does not grow.
Valuation
HP trades around 11 times operating income, and the inversion frames that as a bound rather than a target: the multiple is so low that the price sits below what even a 5%-a-year decline in operating profit would warrant. The price, in plain terms, is not betting on growth. It is betting only that the two businesses do not erode faster than a modest, manageable rate. For a company facing a shrinking printing annuity and a competitive PC market, that is a coherent thing for the market to price.
The families of method split the way they do for a value-and-cash-flow name rather than a growth one. The earnings-power and peer-multiple approaches support the price, while the growth lens calls it expensive, which is the market's way of saying it credits HP with no durable growth. There is little asset-based floor because HP, like many serial repurchasers, has bought back so much stock that book equity is not a meaningful anchor. The valuation case therefore rests not on multiple expansion but on cash generation and capital return: the company turns its mature franchises into free cash flow and hands most of it back.
Solvency is adequate but not a non-issue. Net debt near $6.8 billion runs a bit over two times operating income with interest covered roughly seven times, manageable for a steady cash generator but real leverage that constrains flexibility if margins compress. Fiscal 2026 free cash flow guidance of $2.8 to $3.0 billion is the number that matters, because it funds both the dividend and the buyback that drive the per-share story. The valuation comes down to durability: at 11 times earnings the downside is largely priced, and the question is whether the printing decline stays gradual and the PC cost squeeze stays temporary, or whether either accelerates enough to turn a cheap stock into a value trap.
Catalysts
The fiscal Q2 2026 report, released in late May, beat its prior outlook. Net revenue of $14.4 billion rose 9% year over year, with Personal Systems up 13% to $10.2 billion and its segment operating profit up 30%, while Printing was flat at $4.2 billion. The growth was powered by AI PC demand and the Windows 11 refresh cycle, with AI PCs reaching 44% of total shipments in the quarter, a mix shift toward higher-value machines.
The forward picture has a clear tension between the refresh tailwind and a cost headwind. HP maintained fiscal 2026 free cash flow guidance of $2.8 to $3.0 billion, but it warned that rising input costs, particularly memory and storage, could pressure operating margins in the second half of the year, and it noted it was evaluating a recent US Supreme Court tariff ruling while not currently expecting a negative impact. The key things to watch across the next two quarters are whether the AI PC and Windows 11 refresh sustains Personal Systems growth, whether memory and storage cost inflation compresses margins as flagged, and whether the printing supplies base keeps declining at the pace the annual filing shows.
Peer Cohorts (Per Segment, With Filing Citations)
Personal Systems (reported)
- DELL (Dell Technologies Inc.)
- (no filing in the citation store)
- HPE (HEWLETT PACKARD ENTERPRISE COMPANY)
- (no filing in the citation store)
- IBM (INTERNATIONAL BUSINESS MACHINES CORP)
- (no filing in the citation store)
- STX (Seagate Technology Holdings plc)
- (no filing in the citation store)
- WDC (WESTERN DIGITAL CORPORATION)
- (no filing in the citation store)
- LOGI (LOGITECH INTERNATIONAL S.A.)
- (no filing in the citation store)
- SMCI (SUPER MICRO COMPUTER, INC.)
- (no filing in the citation store)
Printing / Corporate Investments (reported)
- DELL (Dell Technologies Inc.)
- (no filing in the citation store)
- HPE (HEWLETT PACKARD ENTERPRISE COMPANY)
- (no filing in the citation store)
- IBM (INTERNATIONAL BUSINESS MACHINES CORP)
- (no filing in the citation store)
- SMCI (SUPER MICRO COMPUTER, INC.)
- (no filing in the citation store)
- STX (Seagate Technology Holdings plc)
- (no filing in the citation store)
- WDC (WESTERN DIGITAL CORPORATION)
- (no filing in the citation store)
- SNDK (Sandisk Corporation)
- (no filing in the citation store)
- ANET (Arista Networks, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
fiscal Q2 2026 earnings release · fiscal Q2 2026 earnings call