Shares of HP (NYSE:HPQ) jumped 9% on Feb. 23, after the PC and printer vendor posted a solid first quarter report. Revenue rose 4% annually to $12.7 billion, beating expectations by $850 million. Non-GAAP earnings grew 6% to $0.38 per share, topping estimates by a penny.

That marked HP's second straight quarter of year-over-year revenue growth, and represented its best top line growth since it split from Hewlett-Packard Enterprise (NYSE:HPE) in late 2015. Does that rebound indicate that it's finally safe to buy HP again? Let's take a closer look at the bull and bear cases to decide.

HP's Envy curved all-in-one PC.

HP's Envy curved all-in-one PC. Image source: HP.

The bull case for HP

When HP and HPE first split, it seemed like the former would be burdened by fading legacy businesses as the latter expanded into higher growth enterprise markets. PC shipments have declined for five straight years, according to Gartner, and printer sales growth remains anemic due to the longevity of existing hardware and the growing use of digital documents.

That's why HP's growth in the first quarter was so surprising. Personal Systems (PC) revenue rose 10% annually to $8.2 billion, fueled by 7% growth from commercial customers and 15% growth from mainstream consumers. Desktop sales stayed flat, but notebook sales surged 16%. In comparison, HP's rival Lenovo (OTC:LNVGY) posted just 2% sales growth in its PC and tablets division last quarter. Gartner also notes that HP's market share grew from 18.8% to 20.4% between the fourth quarters of 2015 and 2016 -- and it remains the second biggest PC maker after Lenovo.

During the conference call, CFO Catherine Lesjak attributed that growth to a better "mix shift" toward "premium" convertibles, detachables, and thinner devices with longer-lasting batteries. This was an encouraging reversal from the earlier notion that PCs had to become dirt cheap to counter Chromebooks. Looking further ahead, higher demand for "VR ready" PCs could also get its desktop growth back on track.

HP's high-end Spectre laptop.

HP's high-end Spectre laptop. Image source: HP.

Last quarter, HP generated over $700 million in free cash flow and spent over $600 million on buybacks and dividends. Those moves keep HP's multiple low at 12 times earnings with a forward yield of 3% -- which is supported by a low payout ratio of 32%. Analyst expectations for the current year (1% sales growth and flat earnings growth) are also low that so upside surprises are more likely than downside ones.

The bear case against HP

However, HP's printer business remains weak. Total printing revenues dropped 3% annually to $4.5 billion, as 2% growth in consumer hardware failed to offset an 8% decline in commercial hardware and 3% drop in supply sales. HP believes that scaling up through its acquisition of Samsung's (NASDAQOTH: SSNLF) printing business could boost the unit's sales and margins after the deal closes in the second half of 2017. However, that move will also boost the weight of the sluggish printing business relative to Personal Systems -- which could eventually hurt HP's overall top line growth.

HP also believes that sales of large format 3D printers for industrial customers will offset softer sales of traditional printers, but that market remains a small one compared to its core inkjet and laser products. New subscription services for supplies may boost its higher-margin revenues, but that strategy faces ongoing legal challenges from makers of generic cartridges.

It's also tough for HP to sell commoditized products like PCs and printers overseas due to higher component costs and currency headwinds. During the conference call, Lesjak warned that HP had "increased pricing globally in response to unfavorable currency movements and the increased cost of components, which could have a more significant impact on demand than we've assumed." This indicates that the Personal Systems unit's operating margin of 3.8% could drift lower this year.

Lastly, much of HP's earnings growth comes from layoffs and buybacks instead of gross margin expansion. Last October, HP announced that it slash up to 4,000 jobs (about 8% of its workforce) over the following three years to generate up to $300 million in annual savings by the beginning of fiscal 2020. Streamlining the business can be a wise move, but downsizing in the face of tough competition could also dull its competitive edge.

The verdict: HP is a safe buy

Splitting with HPE initially seemed like a risky move, but HP has done a solid job evolving its aging PC business while scaling up and diversifying its printing one. HP isn't a sexy high-growth stock, but it's fundamentally cheap, has a respectable dividend, and is a market leader in the recovering PC market. I believe that those qualities make it a safe core holding for conservative income investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.