Let's talk about the popular HP Inc. (NYSE:HPQ). The company's shares saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on HP’s outlook and valuation to see if the opportunity still exists.
Is HP still cheap?
Good news, investors! HP is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $52.58, but it is currently trading at US$37.63 on the share market, meaning that there is still an opportunity to buy now. However, given that HP’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from HP?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for HP, at least in the near future.
What this means for you:
Are you a shareholder? Although HPQ is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to HPQ, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on HPQ for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
If you'd like to know more about HP as a business, it's important to be aware of any risks it's facing. Be aware that HP is showing 7 warning signs in our investment analysis and 2 of those don't sit too well with us...
If you are no longer interested in HP, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.