HP's (NYSE:HPQ) stock tumbled in late February after the PC and printer maker posted its slowest sales growth in over two years. However, the stock recently rebounded after its second-quarter numbers beat estimates on both the top and bottom lines.

HP's revenue stayed roughly flat year over year at $14 billion but beat estimates very slightly by $30 million. Its adjusted earnings per share, buoyed by buybacks, rose 10% to $0.53 and cleared expectations by $0.02. Those numbers look soft compared to its double-digit sales growth throughout 2018, but they also indicate that the tech giant isn't headed off a cliff.

A silver HP Spectre laptop.

Image source: HP.

I've owned shares of HP since late 2017, and my position has underperformed the S&P 500 by a wide margin. Nonetheless, I plan to stick with this stock for four simple reasons.

Stable PC sales growth

HP generates its revenue from two main businesses: personal systems (PCs and workstations), which accounted for 64% of its sales during the quarter, and printing (hardware and supplies), which accounted for the rest. Here's those two businesses' year-over-year revenue growth over the past year:

Segment

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Personal systems

14%

12%

11%

2%

2%

Printing

11%

11%

9%

0%

(2%)

Total

13%

12%

10%

1%

0%

Data source: HP quarterly reports.

On a constant currency basis, its personal systems revenue rose 5%, compared to 3% growth in the first quarter. This indicates that the business is still growing, even though global PC shipments declined 3% year over year in the first quarter, according to IDC.

Within the segment, HP's commercial revenue rose 7%, thanks to enterprise upgrades for security-oriented desktops and notebooks. That growth offset its 9% decline in consumer revenue, which struggled with longer upgrade cycles, Intel's (NASDAQ:INTC) ongoing chip shortage, and competition from mobile devices.

HP's total PC shipments dipped 1%, with a 5% drop in notebooks offsetting its 6% growth in desktops. However, it still grew the unit's revenue by selling pricier enterprise and gaming PCs.

Expanding operating margins

HP's PC business is much healthier than its printer business, which struggled with a 4% drop in its hardware shipments during the quarter and a 3% decline in its supplies revenue caused by stiff competition from generic ink and toner suppliers. 

Nonetheless, HP's PC and printer operating margins expanded both sequentially and annually:

Segment

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Personal systems

3.8%

3.9%

3.8%

4.2%

4.3%

Printers

16%

16%

16.1%

16.2%

16.4%

Data source: HP quarterly reports.

HP's personal systems operating margin expanded as it sold pricier PCs and acquired NAND and DRAM chips at cyclically low prices. Its printing operating margin improved as it tightened its spending and expanded its Instant Ink subscription program to counter generic ink makers. Therefore, HP's revenue growth remains slow, but it isn't sacrificing its margins to boost its top line.

Robust sales in Asia

HP generates its revenue from three regions -- the Americas, EMEA (Europe, Middle East, and Asia) and APJ (Asia-Pacific and Japan). HP lost momentum in the Americas and EMEA this year, but its growth in Asia remains strong:

Region

Percentage of Q2 Revenue

Year-Over-Year Revenue Growth*

Americas

42%

1%

EMEA

36%

2%

APJ

22%

11%

*Constant currency. Data source: HP Q2 presentation. 

During the conference call, HP CEO Dion Weisler said that China was "a great success" despite a recent slowdown, and that it still saw robust demand for its gaming laptops across the country. Weisler also noted that Japan's "particularly strong" growth offset its slower growth in China.

HP's OMEN gaming laptop.

Image source: HP.

Positive catalysts on the horizon

HP's growth looks sluggish today, but several catalysts are on the horizon. Intel expects to resolve its chip shortage by the end of the year, which should allow HP to sell more mid-range consumer PCs. Low memory prices could also help HP retain healthy gross margins as its PC sales accelerate again.

As for the printing business, the expansion of Instant Ink's global subscriber base could counter generic rivals, its smaller industrial 3D printing business should keep growing, and it can leverage its acquisitions of Samsung's printing unit and office equipment dealer Apogee to lock in more enterprise customers.

Lastly, HP continues to reward shareholders with big buybacks and dividends. It repurchased $691 million in shares and paid out $245 million in dividends during the quarter -- which used up over 100% of its free cash flow.

HP expects its stable sales growth, improving margins, and buybacks to help it grow its adjusted earnings by 6%-9% this year. At $20 per share, HP trades at just nine times that estimate while paying a dividend that yields 3.2%. Investors who sell the stock here instead of waiting for the catalysts to kick in could regret their decision over the next few quarters.