Due to guidance that came in below analyst expectations, HP's (NYSE:HPQ) stock initially took a beating following Q3 earnings, dropping nearly 5% in intra-day trading before investors began to get back on board.

As CEO Dion Weisler put it, HP "continued to make solid progress in executing against our core, growth and future strategic framework." HP is surprisingly strong in several of its initiatives, including expense management and a focus on specific, niche opportunities in the "dying" PC and printer markets.

Based on its mediocre consensus target price of just $15 a share and a majority of "hold" ratings, there are a number of HP bears, and they're currently winning the day. That should be music to the ears of value investors in search of a cheap stock.

Just the facts

HP's fiscal 2016 Q3 was stronger than expected and handily beat the Street's expectations. Though HP's total revenue of $11.9 billion was a 4% decline compared to last year's $12.4 billion in sales, it obliterated expectations of just $11.47 billion. And its non-GAAP (excluding one-time items) per-share earnings of $0.48 also impressed, handily outpacing estimates of $0.44.

But surpassing revenue and earnings per share (EPS) expectations only tells part of HP's Q3 story. Weisler recognized HP needed to become leaner and more nimble to react to the lightning-fast changes -- and opportunities -- the tech industry offers. Last quarter and year to date, HP has been delivering on Weisler's plan, big time.

Part of the reason HP was able to post such strong EPS results and a gross margin jump of two full percentage points to 9.4% last quarter was a nearly $600 million decline in total costs and expenses compared to 2015 -- and the results are even better year to date. For the nine months ended July 31, HP's overhead has declined 9% -- over $3.2 billion – to $32.8 billion.

Alas, Weisler's forecast of $0.34 to $0.37 per-share earnings for the current quarter was below the expected $0.41-a-share estimate. The average analyst expectation has since been lowered to $0.36 a share. The thing is, if HP reports "only" $0.36 EPS this quarter, that will be a whopping 20% jump compared to a year ago.

Hpq Omen

Image source: HP.

And there's more

It may come as a surprise to some, but of the big three PC players -- HP, China-based Lenovo (NASDAQOTH:LNVGY), and privately held Dell -- the former easily out-distanced its competition in calendar Q2 in terms of improvement. Per IDC, HP enjoyed an impressive 5.1% jump in PC sales (yes, you heard that right) year over year, pushing its market share up nearly two full percentage points to 20.8%, putting it just behind Lenovo, which saw a year-over-year drop in shipments.

At least part of the reason HP was able to make such a quantum leap in PC sales -- and is likely to take over Lenovo's spot as king of the PC hill this quarter -- is its focus on the world's gaming hardware market. By the end of 2018, PC gaming hardware is expected to become a $30 billion opportunity, up from $24 billion this year. HP continues to unveil new, PC gaming-specific units including its latest OMEN, which boasts a high-resolution screen, top-of-the-line performance, and comes virtual reality (VR) ready.

HP's dominant PC gaming position helps explain how its PC consumer division revenue climbed 8% in Q3, led by a 12% jump in Notebook sales. HP's new OMEN PC comes in both a traditional desktop version and tablet-notebook variety.

Printing remains HP's biggest challenge, as demonstrated by its 14% drop in sales last quarter. That said, Weisler has a definitive, two-pronged plan to turn the printing tide: (1) . Focus on high-end sales to enterprises, which in turn will boost service and product sales and (2) make 3D printing a reality for both consumers and commercial customers, which HP is already beginning to address.

It will be a while before 3D printing goes mainstream, but HP has positioned itself as a key player. Toss in its industry-leading 3.5% dividend yield, consistently growing bottom line, and a ridiculously low forward price-to-earnings-ratio (P/E) of just 9, and HP is an undeniably cheap stock worth a good, hard look.

Tim Brugger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.