HP INC. (HPQ): what the price assumes

In the published model solve dated 2026-Q2, anchored at $30.40, HP INC. (HPQ) is priced for -5.0% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-24.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/HPQ

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.6% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is supported by earnings-power value, while growth-DCF lands below the price. 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.

Families that justify the price: Earnings Families that call it expensive: Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.9%); the inversion above states its own rate.

Per-Model Detail (n=5)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• The market is pricing HP for a business that shrinks, while fiscal second-quarter revenue rose 9% to $14.4 billion with Personal Systems up 13%.

• Memory is the squeeze: DRAM and NAND now run at roughly 35% of the bill of materials in a PC, up from 15% to 18% a quarter earlier, and management expects the Personal Systems margin to bottom in the fiscal fourth quarter.

• There has been no permanent chief executive since February 2026, when Enrique Lores left to run PayPal and director Bruce Broussard stepped in on an interim basis.

Bull Case

A share price encodes a forecast, and HP's currently encodes a business that gets smaller. At $25.83, what the price implies is operating profit falling by about 4.2% a year. What the company actually reported in May pointed the other way. Fiscal second-quarter revenue was $14.4 billion, up 9% from the prior year, with Personal Systems at $10.2 billion, up 13%, and commercial machines up 14%.

The refresh cycle is doing what refresh cycles do. Corporate fleets bought during the pandemic are aging out, and the machines replacing them carry more memory and more silicon than the ones they retire, which lifts average selling prices even when unit growth is ordinary. Consumer demand held up alongside it, growing 10% in the quarter. Neither number describes a market in structural retreat.

Printing is the part that pays. It produced $4.2 billion of revenue in the quarter at an 18.3% segment operating margin, against Personal Systems at 5.2% on roughly twice the revenue, with supplies growing 1%. Nobody would call that a growth business. It is an annuity, and it is what funds the dividend and the buyback while the hardware half chases volume.

The cash arithmetic is the strongest card. HP guided fiscal 2026 free cash flow to a range of $2.8 billion to $3.0 billion against a market value in the mid twenty billions. The company paid $274 million of dividends and repurchased $100 million of stock in the quarter alone, and the share count has been falling at roughly 3.4% a year. Shrinking the share base while revenue grows is the mechanical form of the bull argument, and it does not require anyone to believe a story.

One figure will look alarming and mostly is not. HP carries a stockholders' deficit, $144 million negative at the end of April, with cash of $3.7 billion and long-term debt of $8.856 billion. That is the arithmetic of a company that has handed back more capital over the decades than it retained in profits, not a sign of distress. Operating profit covers the interest bill about 6.5 times over, and net borrowings sit at roughly 2.5 times operating income. Leveraged, certainly. Serviceable, comfortably.

Bear Case

The squeeze arrived from an unglamorous direction. Memory now accounts for roughly 35% of the bill of materials in a PC, up from 15% to 18% only a quarter earlier, and HP's finance chief told investors that memory costs roughly doubled sequentially between the first and second fiscal quarters. Personal Systems is around half of HP's revenue and already earns a 5.2% segment operating margin. There is not a great deal of cushion in that figure for a doubling in a third of the input cost.

Management is not hiding from it. The company has said it expects the volatility to persist through fiscal 2026 and probably into fiscal 2027, and that the Personal Systems margin will trough in the fiscal fourth quarter, roughly the August to October window. It is taking targeted pricing actions and steering buyers toward configurations carrying less memory. Both responses are sensible. Both also mean either the customer pays more or HP ships a lesser machine, and when the competing box on the shelf contains the same components, neither move is free.

The deeper issue is where the profit comes from. Printing produced $4.2 billion of revenue in the quarter, flat year over year and down 2% in constant currency, at an 18.3% segment margin, with supplies up 1%. That is the annuity funding the dividend, and it is not expanding. So the company is a growing, low-margin hardware operation bolted to a flat, high-margin consumables operation. Consolidated margins move against HP whenever the growing half outgrows the other, which is the position it is in now.

None of this makes the shares expensive on their face. The price is paying for operating profit to decline by about 4.2% a year, which is not a demanding hurdle to clear. The bear case is that the hurdle sits on the wrong variable. A mid-single-digit consolidated decline can be produced entirely by printing eroding while Personal Systems grows at a margin near zero, and volume growth arriving with no profit attached does not rescue the arithmetic. It just makes the revenue line look busy.

The balance sheet offers no equity cushion underneath any of that. HP ended April with a stockholders' deficit of $144 million, cash of $3.7 billion and long-term debt of $8.856 billion. Net borrowings sit at roughly 2.5 times operating income and interest is covered about 6.5 times, which is comfortable rather than tight. But there is no book value under the shares to set a floor, and buybacks funded against future cash flow look excellent while the cash flow arrives and awkward when a cost shock lands in the same fiscal year.

And nobody is permanently in charge. Enrique Lores stepped down as chief executive on February 3, 2026 to take the top job at PayPal, and Bruce Broussard, a director since 2021, took over on an interim basis while the board runs a search. An interim chief executive holding a cliff-vesting equity grant is not the person who commits to restructuring a printing business over the back half of a decade. The choices HP faces are exactly the kind that need someone with a mandate.

Valuation

Cheap and shrinking are different claims, and separating them is the work here. Today's quote comes to roughly 11.5 times operating income, and what it embeds is not growth: the price is paying for operating profit to decline by about 4.2% a year. That is a low bar. Whether HP clears it depends far less on how many PCs it ships than on what happens inside printing.

Most of the ways of valuing this company put the shares above today's quote. On the earnings the business actually produces, capitalised with nothing credited for growth, the price is about 0.71 times where those methods land. Peer comparison stretches the gap further: the price is about 0.45 times what that peer-multiple frame supports. The only methods the price sits above are the dividend-discount ones, at about 1.53 times, and they reach that answer by assuming the payout grows at whatever retained profit can fund, which for a company handing back nearly all its cash is close to nothing.

There is no book-value anchor in the picture at all, and the reason is worth understanding rather than fearing. HP's stockholders' equity is negative, a deficit of $144 million at the end of April, because decades of repurchases have returned more capital to owners than the company kept in retained profit. Any frame that reads off balance-sheet equity has nothing to grip. That is a fact about capital allocation history, not about the ability to pay bills.

The concrete question is mix. Personal Systems earned a 5.2% operating margin on $10.2 billion of revenue in the quarter; Printing earned 18.3% on $4.2 billion. Every incremental dollar that tilts the blend toward Personal Systems dilutes the consolidated margin, and the memory cost cycle is compressing precisely the segment that is growing. Management's own fiscal 2026 range, GAAP diluted earnings per share of $2.15 to $2.45, already carries that pressure inside it.

The peer group here flatters nothing and clarifies little. Dell, HPE, IBM, Seagate, Western Digital and Logitech are the listed names nearest HP's segments, and not one of them runs the same combination of commodity hardware volume and consumables annuity. The comparison is a sector reference rather than a like-for-like read, which is part of why the peer frame lands so far from the quote.

Solvency bounds the downside without flattering it. Cash was $3.7 billion against long-term debt of $8.856 billion and $810 million of short-term borrowings at the end of April. Net borrowings run to about 2.5 times operating income and interest is covered around 6.5 times. Guided free cash flow of $2.8 billion to $3.0 billion for the fiscal year covers the dividend several times over. None of that describes a company in trouble. It describes a company the market has decided will be worth a little less every year, priced on that assumption, and currently growing.

Catalysts

HP's fiscal third quarter ends on July 31 and results are expected around August 27, 2026. Guidance for that quarter is GAAP diluted earnings per share of $0.47 to $0.63, and on the company's own adjusted basis $0.61 to $0.71. The line worth reading first will not be earnings but the Personal Systems margin, because management has placed the trough in the following quarter. Confirmation of that timing, or a pull-forward of it, changes the shape of fiscal 2027 more than the third-quarter number does.

The memory market is the second variable and it sits outside HP's control. Costs roughly doubled sequentially into the April quarter, and memory now runs at about 35% of a PC's bill of materials. Easing DRAM and NAND pricing would reach HP's gross margin with a lag of a quarter or so, as higher-cost inventory clears. Further tightening does the same thing in the other direction, and the company has already said it expects the volatility to run into fiscal 2027.

Third, the chair itself. The board formed a search committee and retained an external search firm after Enrique Lores departed in February 2026. A permanent appointment is the event that would let HP commit to anything structural in printing or in capital allocation, and no date has been put on it.

Peer Cohorts (Per Segment, With Filing Citations)

Personal Systems (reported)

• DELL (Dell Technologies Inc.)
• FY2025 10-K: …account teams, which include technical sales specialists, form long-term relationships with and support our largest customers, develop tailored solutions to meet their needs, position the capabilities of Dell Technologies, and provide us with customer feedback. For these customers, we offer several programs designed…
• FY2025 10-K: …experienced cyber-attacks that leveraged compromised credentials of our partners, employees, and customers to gain unauthorized access to Dell Technologies, partner, and vendor systems and confidential information, including information about our customers, employees, and partners. These incidents have caused, and…
• HPE (HEWLETT PACKARD ENTERPRISE COMPANY)
• FY2025 10-K: …consumption models through the HPE GreenLake platform. Financial Services provides flexible investment solutions, such as leasing, financing, IT consumption, utility programs, and asset management services for customers that facilitate unique technology deployment models and the acquisition of complete IT solutions,…
• FY2025 10-K: …in order to terminate or limit these rights. We rely on the performance of our business systems and processes, as well as those of third-parties with whom we do business. Some of our business processes depend upon our IT systems. Portions of our IT infrastructure have experienced, and may experience, interruptions,…
• IBM (INTERNATIONAL BUSINESS MACHINES CORP)
• FY2025 10-K: …when the usage occurs. Proprietary term licenses often have a one-month contract term due to client termination rights, in which case, revenue would be recognized in that month for both the license and PCS. Clients may contract to convert their existing IBM term license software into perpetual license software plus…
• FY2025 10-K: …of sales. The company performs periodic reviews to ensure that unamortized program costs remain recoverable from future revenue. Costs to support or service licensed programs are charged to software cost within cost of sales as incurred. The company capitalizes certain costs that are incurred to purchase or develop…
• STX (Seagate Technology Holdings plc)
• FY2025 10-K: …or the loss, corruption, unavailability or dissemination of proprietary or confidential information of our customers or about us or other third parties. • We must maintain and upgrade our global enterprise resource planning system and other information technology ("IT") systems, and our failure to do so could have a…
• FY2025 10-K: …utilizing false image or voice recognition, or could result from us or our customers, vendors or business partners incorporating the output of AI tools, such as malicious code from an AI-generated source code. Our network and storage applications, as well as those of our customers, business partners, and third-party…
• WDC (WESTERN DIGITAL CORPORATION)
• FY2025 10-K: …difficult for us to accurately assess the associated credit risks. Our customers' credit risk may also be exacerbated by an economic downturn or other adverse global or regional economic conditions. Any credit losses we may suffer as a result of these increased risks, or as a result of credit losses from any…
• FY2025 10-K: …strong execution, (5) Innovation and growth for creating new products and applications and identifying new market opportunities, and (6) High performance teams with the skill sets to meet go-forward business needs. Patents, Licenses and Proprietary Information We rely on a combination of patents, trademarks,…
• LOGI (LOGITECH INTERNATIONAL S.A.)
• FY2025 10-K: …an important means of interaction with and source of information for consumers of our products. We also rely on our centralized information technology systems for product-related information and to store intellectual property and data, forecast our business, maintain financial records, manage operations and…
• FY2025 10-K: …transmission and other processing of such information, we may face requirements that pose compliance challenges in existing markets as well as new international markets that we seek to enter. The collection and processing of personal data also heightens the risk of security breaches and other data security issues…
• SMCI (SUPER MICRO COMPUTER, INC.)
• FY2025 10-K: …chains and increase the cost of our and our partners' products, and have a negative impact on consumer confidence, which could impair our future growth and adversely affect our international operations, business, financial condition, and results of operations. Any failure, disruption or security breach or incident of…
• FY2025 10-K: …Registered Public Accounting Firm (Deloitte & Touche LLP) 24.1+ Power of Attorney (included in signature pages) 31.1+ Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2+ Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of…

Printing / Corporate Investments (reported)

• DELL (Dell Technologies Inc.)
• FY2025 10-K: …or outside the United States could make it more difficult and costly for us to manufacture and deliver our products to our customers, obtain production materials from our suppliers, or perform other critical corporate functions. 26 Table of Conte nts Concern over climate change could also result in transition risks…
• FY2025 10-K: …monitor market pricing, including the effect of foreign exchange rate movements, in an effort to provide the best value for our customers. We also closely monitor changing demand to keep pace with the demands of current and prospective customers. We believe that our strong relationships with our customers and channel…
• HPE (HEWLETT PACKARD ENTERPRISE COMPANY)
• FY2025 10-K: …by business and region. We believe that customer buying patterns and different regional market conditions require us to tailor our sales, marketing, and distribution efforts accordingly. We are focused on driving the depth and breadth of our coverage, in addition to identifying efficiencies and productivity gains, in…
• FY2025 10-K: Parent Program outside the U.S. provides for the issuance of commercial paper denominated in U.S. dollars, euros or British pounds up to a maximum aggregate principal amount of $ 3.0 billion or the equivalent in those alternative currencies. The combined aggregate principal amount of commercial paper outstanding under…
• IBM (INTERNATIONAL BUSINESS MACHINES CORP)
• FY2025 10-K: …supports clients' mission-critical, on-premise workloads in industries such as banking, airlines and retail. This includes transaction processing software such as Customer Information Control System and storage software, analytics and integration software running on IBM operating systems, AI assistants for IBM Z, and…
• FY2025 10-K: …operating (non-GAAP) pre-tax income growth in 2025. From a segment perspective, in 2025, the impact from currency translation and hedging to our segments profit margin year-to-year growth was not material. Hedging and certain underlying foreign currency transaction gains and losses are allocated to our segment…
• SMCI (SUPER MICRO COMPUTER, INC.)
• FY2025 10-K: …claims, litigation, and other actions, including potential regulatory proceedings, involving patent and other intellectual property matters, taxes, labor and employment, competition and antitrust, commercial disputes, goods and services offered by us and by third parties, and other matters. There are many…
• FY2025 10-K: …manufacturers for materials and sub-assemblies. We believe that selectively using outsourced manufacturing services allows us to focus on our core competencies in product design and development, and increases our operational flexibility. We believe our manufacturing strategy allows us to adjust manufacturing capacity…
• STX (Seagate Technology Holdings plc)
• FY2025 10-K: …seek to improve our manufacturing efficiency and reduce manufacturing costs by: • Employing manufacturing automation; • Employing machine learning algorithms and AI; • Improving product quality and reliability; • Integrating our supply chain with suppliers and customers to enhance our demand visibility and reduce our…
• FY2025 10-K: …processes similar to those used to produce semiconductor integrated circuits, though challenges related to magnetic film properties and topographical structures are unique to the disk drive industry. In addition, HAMR technology utilizes a laser and a near-field transducer on the read/write head to heat an extremely…
• WDC (WESTERN DIGITAL CORPORATION)
• FY2025 10-K: We believe that we have adequate cross-licenses and other agreements in place in addition to our own IP portfolio to compete successfully in the storage industry. For a discussion of associated risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10‑K. Manufacturing and Suppliers We believe that we…
• FY2025 10-K: …strong execution, (5) Innovation and growth for creating new products and applications and identifying new market opportunities, and (6) High performance teams with the skill sets to meet go-forward business needs. Patents, Licenses and Proprietary Information We rely on a combination of patents, trademarks,…
• SNDK (Sandisk Corporation)
• FY2025 10-K: …technology that we license from other parties to manufacture and sell our products. We believe that we have adequate cross-licenses and other agreements in place in addition to our own intellectual property portfolio to compete successfully in the storage industry. For a discussion of associated risks, see Part I,…
• FY2025 10-K: …overhead; increased logistics, component and other costs; decreased demand for our products; and manufacturing challenges. Employee infections or government restrictions to contain the spread of infectious disease, like travel restrictions, quarantines, business shutdowns, or trade controls, could harm employees'…
• ANET (Arista Networks, Inc.)
• FY2025 10-K: …of our customers, our business, liquidity, financial condition, and/or results of operations would be materially and adversely affected. If we fail to maintain effective internal control over financial reporting in the future, the accuracy and timing of our financial reporting may be adversely affected. Assessing our…
• FY2025 10-K: …facilities in the United States, the Netherlands and Singapore for further transformation as needed and distribution. We have four direct fulfillment facilities worldwide to hold finished goods inventory and perform final product configuration and shipping to customers and partners. After distribution, our products…

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.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• 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.