Is HPQ Undervalued Amid Mixed Analyst Sentiment and Strong Long-Term Growth Prospects?

HP Inc. (HPQ) has long been a cornerstone of the technology sector, but its current valuation and financial performance raise critical questions for value investors. With a trailing twelve-month (TTM) P/E ratio of 10.4 as of August 2025—10% above its 10-year average of 9.44 but below the previous four quarters’ average of 11.6—the stock appears modestly undervalued relative to historical norms [3]. This discrepancy suggests a potential disconnect between short-term market sentiment and the company’s underlying fundamentals.

The company’s earnings growth further supports a value investing case. In Q3 2025, HPQ reported a 23% year-over-year increase in GAAP diluted EPS to $0.80, driven by cost discipline and operational efficiency [2]. While non-GAAP EPS declined by 10.7% to $0.75, this reflects adjustments for one-time charges, not a deterioration in core performance. Revenue growth of 3.1% to $13.9 billion, bolstered by a 6% rise in the Personal Systems segment, underscores resilience in the PC market amid broader economic uncertainty [1].

However, HPQ’s valuation is complicated by its negative book value per share of -$1.35 and a P/B ratio of -19.76, indicating liabilities exceed assets [5]. This is exacerbated by a debt-to-equity ratio of -1065.7%, signaling extreme leverage [6]. Despite these red flags, the company generated $1.5 billion in free cash flow during Q3 2025, with $1.7 billion in net cash from operations, demonstrating liquidity and debt management capabilities [2]. For value investors, the key question becomes whether these cash flows can sustain deleveraging while supporting long-term growth.

Analyst sentiment remains mixed, with a consensus “Hold” rating and an average price target of $29.71 (7.3% upside from the August 2025 price of $27.69) [1]. Optimists like Argus Research’s Jim Kelleher cite a $40 price target, betting on the PC market’s recovery, while skeptics such as Wells Fargo’s Aaron Rakers issue a “Sell” rating at $25, citing printing segment declines [1]. This divergence reflects the stock’s dual narrative: a strong core business in hardware versus structural challenges in its lower-margin printing division.

The Validea Earnings Yield Investor model, based on Joel Greenblatt’s framework, awards HPQ a 100% rating, emphasizing its combination of high earnings yield and robust free cash flow [4]. This aligns with value investing principles, which prioritize earnings quality over short-term volatility. Yet, the negative equity position and high debt levels remain significant risks, particularly if interest rates rise or economic conditions worsen.

For investors, the calculus hinges on balancing these factors. HPQ’s current P/E of 10.4 is below the S&P 500’s average of 18, suggesting a discount to broader market multiples. Meanwhile, its projected $2.6–$3.0 billion in fiscal 2025 free cash flow could fund dividends, share buybacks, or debt reduction, enhancing long-term value [5]. If the company can stabilize its printing segment and maintain PC market momentum, the stock’s intrinsic value may justify its current price.

Source:
[1] HP (HPQ) Stock Forecast & Price Target [https://www.tipranks.com/stocks/hpq/forecast]
[2] HP Inc. Reports Fiscal 2025 Third-Quarter Results [https://investor.hp.com/news-events/news/news-details/2025/HP-Inc--Reports-Fiscal-2025-Third-Quarter-Results/default.aspx]
[3] HPQ - Hp PE ratio, current and historical analysis [https://fullratio.com/stocks/nyse-hpq/pe-ratio]
[4] Valideas Top Information Technology Stocks Based On Joel Greenblatt [https://www.nasdaq.com/articles/valideas-top-information-technology-stocks-based-joel-greenblatt-8-29-2025]