My word, Hewlett-Packard
What Fools say:
Here's how HP's CAPS rating stacks up against some of its peers and competitors:
|
Market Cap (billions) |
Trailing P/E Ratio |
CAPS Rating (out of 5) |
|
|---|---|---|---|
|
International Business Machines |
$175.2 |
16.6 |
*** |
|
Hewlett-Packard |
$117.4 |
16.2 |
**** |
|
Canon |
$68.0 |
15.5 |
***** |
|
Dell |
$43.3 |
16.1 |
** |
|
Sun Microsystems |
$10.5 |
17.9 |
*** |
Data from Motley Fool CAPS and Yahoo! Finance as of May 19.
CAPS player ChannelDunlap notes that HP is the "#1 PC Manufacturer in the world, and growing. But since everything that goes up must come down (ie, they won't be #1 forever), I like the EDS deal giving them more opportunities in different markets."
On the bearish side of the fence, OnyongJun sees the EDS deal in a different light: "After draining the EDS swamp HP could find a landscape of snapping alligators capable of taking it down the drain." Ouch.
In total, we've seen two negative CAPS commentaries about the EDS deal, but 26 positive ones. I think it's safe to say that your fellow investors like the move.
What management does:
HP has an unbroken streak of 11 quarters in a row of increasing operating margins. The accelerating sales streak is a bit shorter, stopping at five quarters, but still impressive.
|
10/2006 |
1/2007 |
4/2007 |
7/2007 |
10/2007 |
1/2008 |
|
|---|---|---|---|---|---|---|
|
Gross |
24.3% |
24.4% |
24.3% |
24.2% |
24.4% |
24.5% |
|
Operating |
7.4% |
7.6% |
7.9% |
8.2% |
8.4% |
8.8% |
|
Net |
6.8% |
6.9% |
6.6% |
6.8% |
7.0% |
7.3% |
|
FCF/Revenue |
9.6% |
7.1% |
7.2% |
6.0% |
6.3% |
9.2% |
|
Growth (YOY) |
10/2006 |
1/2007 |
4/2007 |
7/2007 |
10/2007 |
1/2008 |
|---|---|---|---|---|---|---|
|
Revenue |
5.7% |
7.0% |
9.2% |
11.7% |
13.8% |
14.4% |
|
Earnings |
158.5% |
143.0% |
76.9% |
38.2% |
17.2% |
20.4% |
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
With EDS under its belt, HP is looking a lot like a carbon copy of Big Blue. You certainly could pick worse businesses to serve as a template for your own, and IT services tend to come with handsome profit margins and a nearly guaranteed eternal revenue stream.
As for this quarter, the signals are mostly positive. IBM is doing fine, and Sun somehow manages to grow without a coherent business strategy. While printer rival Canon reported a weak quarter, that owed more to a stronger yen than poor unit sales. HP swings in the other direction, and it should be helped by a weakening dollar. Expect good news, and a continued recovery from last week's acquisition-related value drop.
