Shares of Hewlett-Packard (NYSE: HPQ) hit a 52-week low yesterday, though an after-hours bounce following news of job cuts and an earnings beat reversed the slide for the time being. Let's take a look at how the company got there to find out whether cloudy skies remain on the horizon.
How it got here
It's been a rough year for PC makers, though few have had it worse than HP. Although the company's seen respectable unit growth and remains the PC market share leader, a string of high-profile stumbles have given investors reason to worry. High-profile executive reshuffling bungled by a board of directors that's become the butt of jokes combined with public schizophrenia over the company's future (remember when Meg Whitman had to call backsies on plans to rid the company of its PC business?) have been more than enough to stoke those worries, dropping shares by 41% over the past year.
There's also the long-term fear that the PC is on its way out, and HP's yet to devise an effective response to the Apple (Nasdaq: AAPL)-led tablet boom. That's led to a diversity of results for major hardware companies, with Apple and IBM (NYSE: IBM) riding the post-PC wave to new heights while HP and Dell (Nasdaq: DELL) sank:
HPQ Total Return Price data by YCharts
What you need to know
A quick look at some of these companies' key numbers offers a quick bird's-eye view of the carnage:
|
Company |
P/E Ratio |
3-Year Annualized Earnings Growth |
Net Margin (TTM) |
|---|---|---|---|
| HP | 7.4 | (8.1%) | 4.8% |
| Dell | 6.6 | 34.6% | 5.6% |
| Apple | 13.9 | 67.4% | 27.1% |
| IBM | 14.6 | 6.1% | 15.0% |
Source: Yahoo! Finance.
Although Dell's three-year growth looks impressive, it's recession-inflated; its four-year annualized growth rate is just 9%. A longer timeline wouldn't make HP look better, though. Its trailing-12-month net income is its lowest take since 2005. IBM's been consistently growing its bottom line -- though not as fast as Apple -- and its stock price has roughly kept pace. HP's not much different than its competitors in terms of valuation when you consider the broad P/E compression that's squeezed Silicon Valley for much of the last decade:
HPQ P/E Ratio data by YCharts
Unfortunately, for HP shareholders, their corporate leadership has been, shall we say, less than stellar, and its diversification efforts likewise an embarrassment. Its two largest acquisitions in recent memory have been a colossal Palm face-plant and a king's ransom for software maker Autonomy, hardly encouraging signs of revival in the fast-moving computer industry.
What's next?
Where does HP go from here? That will depend on whether CEO Meg Whitman can restore confidence and chart a way forward at the helm of this seemingly rudderless ship. The Motley Fool's CAPS community has given HP a three-star rating, but 91% expect the stock to rebound and break its 52-week slide, which seems like a vote of confidence in the former eBay helmswoman.
Interested in tracking this stock as it continues on its path? Add HP to your watchlist now for all the news we Fools can find, delivered to your inbox as it happens. If you're looking for winners in the next technology revolution, take a look at The Motley Fool's latest free report on how "The Future is Made in America."
