Intrinsic value of HP - HPQ

Previous Close

$21.79

  Intrinsic Value

$23.14

stock screener

  Rating & Target

hold

+6%

  Value-price divergence*

+21%

Previous close

$21.79

 
Intrinsic value

$23.14

 
Up/down potential

+6%

 
Rating

hold

 
Value-price divergence*

+21%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of HPQ stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 36.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -6.27
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
Revenue, $m
  48,238
  51,566
  55,027
  58,625
  62,368
  66,264
  70,320
  74,547
  78,951
  83,545
  88,337
  93,339
  98,562
  104,019
  109,723
  115,686
  121,923
  128,448
  135,277
  142,427
  149,914
  157,756
  165,972
  174,581
  183,604
  193,062
  202,979
  213,377
  224,281
  235,719
  247,715
Variable operating expenses, $m
 
  45,597
  48,619
  51,762
  55,031
  58,433
  61,976
  65,667
  69,514
  73,525
  77,711
  81,517
  86,079
  90,845
  95,826
  101,034
  106,481
  112,179
  118,144
  124,388
  130,927
  137,775
  144,951
  152,469
  160,350
  168,610
  177,271
  186,352
  195,875
  205,864
  216,341
Fixed operating expenses, $m
 
  2,101
  2,154
  2,208
  2,263
  2,319
  2,377
  2,437
  2,498
  2,560
  2,624
  2,690
  2,757
  2,826
  2,897
  2,969
  3,043
  3,119
  3,197
  3,277
  3,359
  3,443
  3,529
  3,617
  3,708
  3,801
  3,896
  3,993
  4,093
  4,195
  4,300
Total operating expenses, $m
  44,689
  47,698
  50,773
  53,970
  57,294
  60,752
  64,353
  68,104
  72,012
  76,085
  80,335
  84,207
  88,836
  93,671
  98,723
  104,003
  109,524
  115,298
  121,341
  127,665
  134,286
  141,218
  148,480
  156,086
  164,058
  172,411
  181,167
  190,345
  199,968
  210,059
  220,641
Operating income, $m
  3,549
  3,868
  4,253
  4,655
  5,074
  5,511
  5,967
  6,443
  6,940
  7,459
  8,002
  9,132
  9,726
  10,349
  11,000
  11,683
  12,399
  13,149
  13,936
  14,762
  15,628
  16,537
  17,492
  18,494
  19,546
  20,652
  21,813
  23,032
  24,313
  25,660
  27,074
EBITDA, $m
  3,881
  4,508
  4,899
  5,306
  5,730
  6,173
  6,635
  7,117
  7,621
  8,147
  8,697
  9,273
  9,875
  10,505
  11,166
  11,857
  12,583
  13,343
  14,140
  14,976
  15,854
  16,775
  17,742
  18,757
  19,823
  20,943
  22,118
  23,354
  24,651
  26,015
  27,448
Interest expense (income), $m
  318
  276
  -173
  -113
  -51
  14
  82
  153
  226
  302
  382
  465
  552
  643
  738
  837
  940
  1,049
  1,162
  1,280
  1,405
  1,535
  1,671
  1,813
  1,963
  2,120
  2,284
  2,456
  2,637
  2,826
  3,025
Earnings before tax, $m
  3,761
  3,592
  4,427
  4,768
  5,125
  5,497
  5,885
  6,290
  6,714
  7,157
  7,620
  8,667
  9,174
  9,706
  10,263
  10,846
  11,459
  12,101
  12,774
  13,481
  14,224
  15,003
  15,821
  16,681
  17,583
  18,532
  19,529
  20,576
  21,677
  22,834
  24,050
Tax expense, $m
  1,095
  970
  1,195
  1,287
  1,384
  1,484
  1,589
  1,698
  1,813
  1,932
  2,057
  2,340
  2,477
  2,621
  2,771
  2,929
  3,094
  3,267
  3,449
  3,640
  3,840
  4,051
  4,272
  4,504
  4,748
  5,004
  5,273
  5,556
  5,853
  6,165
  6,493
Net income, $m
  2,496
  2,622
  3,231
  3,481
  3,741
  4,013
  4,296
  4,592
  4,901
  5,224
  5,562
  6,327
  6,697
  7,085
  7,492
  7,918
  8,365
  8,833
  9,325
  9,841
  10,383
  10,952
  11,549
  12,177
  12,836
  13,528
  14,256
  15,021
  15,824
  16,669
  17,556

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6,288
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  28,987
  24,267
  25,895
  27,588
  29,350
  31,183
  33,092
  35,081
  37,154
  39,315
  41,570
  43,924
  46,382
  48,950
  51,634
  54,440
  57,375
  60,446
  63,660
  67,024
  70,548
  74,238
  78,104
  82,156
  86,402
  90,853
  95,519
  100,413
  105,544
  110,926
  116,572
Adjusted assets (=assets-cash), $m
  22,699
  24,267
  25,895
  27,588
  29,350
  31,183
  33,092
  35,081
  37,154
  39,315
  41,570
  43,924
  46,382
  48,950
  51,634
  54,440
  57,375
  60,446
  63,660
  67,024
  70,548
  74,238
  78,104
  82,156
  86,402
  90,853
  95,519
  100,413
  105,544
  110,926
  116,572
Revenue / Adjusted assets
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
  2.125
Average production assets, $m
  1,614
  1,702
  1,816
  1,935
  2,058
  2,187
  2,321
  2,460
  2,605
  2,757
  2,915
  3,080
  3,253
  3,433
  3,621
  3,818
  4,023
  4,239
  4,464
  4,700
  4,947
  5,206
  5,477
  5,761
  6,059
  6,371
  6,698
  7,041
  7,401
  7,779
  8,175
Working capital, $m
  -340
  -7,013
  -7,484
  -7,973
  -8,482
  -9,012
  -9,564
  -10,138
  -10,737
  -11,362
  -12,014
  -12,694
  -13,404
  -14,147
  -14,922
  -15,733
  -16,581
  -17,469
  -18,398
  -19,370
  -20,388
  -21,455
  -22,572
  -23,743
  -24,970
  -26,256
  -27,605
  -29,019
  -30,502
  -32,058
  -33,689
Total debt, $m
  6,813
  -4,223
  -2,758
  -1,234
  352
  2,002
  3,720
  5,510
  7,375
  9,321
  11,350
  13,469
  15,681
  17,992
  20,408
  22,933
  25,575
  28,338
  31,231
  34,259
  37,430
  40,751
  44,231
  47,877
  51,699
  55,705
  59,904
  64,308
  68,927
  73,771
  78,852
Total liabilities, $m
  32,876
  21,840
  23,305
  24,829
  26,415
  28,065
  29,783
  31,573
  33,438
  35,384
  37,413
  39,532
  41,744
  44,055
  46,471
  48,996
  51,638
  54,401
  57,294
  60,322
  63,493
  66,814
  70,294
  73,940
  77,762
  81,768
  85,967
  90,371
  94,990
  99,834
  104,915
Total equity, $m
  -3,889
  2,427
  2,589
  2,759
  2,935
  3,118
  3,309
  3,508
  3,715
  3,932
  4,157
  4,392
  4,638
  4,895
  5,163
  5,444
  5,738
  6,045
  6,366
  6,702
  7,055
  7,424
  7,810
  8,216
  8,640
  9,085
  9,552
  10,041
  10,554
  11,093
  11,657
Total liabilities and equity, $m
  28,987
  24,267
  25,894
  27,588
  29,350
  31,183
  33,092
  35,081
  37,153
  39,316
  41,570
  43,924
  46,382
  48,950
  51,634
  54,440
  57,376
  60,446
  63,660
  67,024
  70,548
  74,238
  78,104
  82,156
  86,402
  90,853
  95,519
  100,412
  105,544
  110,927
  116,572
Debt-to-equity ratio
  -1.752
  -1.740
  -1.060
  -0.450
  0.120
  0.640
  1.120
  1.570
  1.990
  2.370
  2.730
  3.070
  3.380
  3.680
  3.950
  4.210
  4.460
  4.690
  4.910
  5.110
  5.310
  5.490
  5.660
  5.830
  5.980
  6.130
  6.270
  6.400
  6.530
  6.650
  6.760
Adjusted equity ratio
  -0.447
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,496
  2,622
  3,231
  3,481
  3,741
  4,013
  4,296
  4,592
  4,901
  5,224
  5,562
  6,327
  6,697
  7,085
  7,492
  7,918
  8,365
  8,833
  9,325
  9,841
  10,383
  10,952
  11,549
  12,177
  12,836
  13,528
  14,256
  15,021
  15,824
  16,669
  17,556
Depreciation, amort., depletion, $m
  332
  640
  645
  651
  656
  662
  668
  675
  681
  688
  695
  141
  149
  157
  165
  174
  184
  194
  204
  215
  226
  238
  250
  263
  277
  291
  306
  322
  338
  355
  373
Funds from operations, $m
  2,893
  3,262
  3,876
  4,131
  4,397
  4,675
  4,964
  5,266
  5,582
  5,912
  6,258
  6,467
  6,846
  7,242
  7,657
  8,092
  8,548
  9,027
  9,529
  10,056
  10,609
  11,190
  11,799
  12,440
  13,113
  13,819
  14,562
  15,342
  16,162
  17,024
  17,930
Change in working capital, $m
  -337
  -453
  -471
  -489
  -509
  -530
  -552
  -575
  -599
  -625
  -652
  -680
  -710
  -742
  -776
  -811
  -848
  -887
  -929
  -972
  -1,018
  -1,067
  -1,117
  -1,171
  -1,227
  -1,286
  -1,349
  -1,414
  -1,483
  -1,555
  -1,632
Cash from operations, $m
  3,230
  3,714
  4,347
  4,621
  4,906
  5,204
  5,516
  5,841
  6,181
  6,537
  6,909
  7,148
  7,556
  7,984
  8,433
  8,903
  9,397
  9,914
  10,458
  11,028
  11,627
  12,256
  12,917
  13,611
  14,340
  15,106
  15,910
  16,756
  17,645
  18,579
  19,561
Maintenance CAPEX, $m
  0
  -74
  -78
  -83
  -88
  -94
  -100
  -106
  -112
  -119
  -126
  -133
  -141
  -149
  -157
  -165
  -174
  -184
  -194
  -204
  -215
  -226
  -238
  -250
  -263
  -277
  -291
  -306
  -322
  -338
  -355
New CAPEX, $m
  -433
  -88
  -114
  -119
  -124
  -129
  -134
  -139
  -145
  -152
  -158
  -165
  -172
  -180
  -188
  -197
  -206
  -215
  -225
  -236
  -247
  -259
  -271
  -284
  -298
  -312
  -327
  -343
  -360
  -377
  -396
Cash from investing activities, $m
  48
  -162
  -192
  -202
  -212
  -223
  -234
  -245
  -257
  -271
  -284
  -298
  -313
  -329
  -345
  -362
  -380
  -399
  -419
  -440
  -462
  -485
  -509
  -534
  -561
  -589
  -618
  -649
  -682
  -715
  -751
Free cash flow, $m
  3,278
  3,553
  4,155
  4,419
  4,694
  4,982
  5,282
  5,596
  5,924
  6,267
  6,625
  6,849
  7,243
  7,655
  8,088
  8,541
  9,017
  9,515
  10,039
  10,589
  11,166
  11,772
  12,408
  13,077
  13,779
  14,517
  15,292
  16,107
  16,964
  17,864
  18,810
Issuance/(repayment) of debt, $m
  -2,087
  -10,958
  1,465
  1,524
  1,585
  1,650
  1,718
  1,790
  1,866
  1,945
  2,030
  2,119
  2,212
  2,311
  2,416
  2,526
  2,641
  2,764
  2,892
  3,028
  3,171
  3,321
  3,480
  3,646
  3,822
  4,006
  4,200
  4,404
  4,618
  4,844
  5,081
Issuance/(repurchase) of shares, $m
  -1,113
  9,904
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -13,565
  -1,054
  1,465
  1,524
  1,585
  1,650
  1,718
  1,790
  1,866
  1,945
  2,030
  2,119
  2,212
  2,311
  2,416
  2,526
  2,641
  2,764
  2,892
  3,028
  3,171
  3,321
  3,480
  3,646
  3,822
  4,006
  4,200
  4,404
  4,618
  4,844
  5,081
Total cash flow (excl. dividends), $m
  -10,287
  2,499
  5,621
  5,943
  6,280
  6,632
  7,000
  7,386
  7,789
  8,212
  8,655
  8,968
  9,455
  9,967
  10,503
  11,067
  11,658
  12,279
  12,931
  13,617
  14,337
  15,093
  15,888
  16,723
  17,600
  18,523
  19,492
  20,511
  21,582
  22,708
  23,891
Retained Cash Flow (-), $m
  31,657
  -12,526
  -163
  -169
  -176
  -183
  -191
  -199
  -207
  -216
  -226
  -235
  -246
  -257
  -268
  -281
  -293
  -307
  -321
  -336
  -352
  -369
  -387
  -405
  -425
  -445
  -467
  -489
  -513
  -538
  -565
Prev. year cash balance distribution, $m
 
  6,210
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -3,817
  5,458
  5,774
  6,104
  6,449
  6,809
  7,187
  7,582
  7,996
  8,430
  8,733
  9,209
  9,710
  10,235
  10,786
  11,365
  11,972
  12,610
  13,280
  13,984
  14,724
  15,501
  16,318
  17,176
  18,078
  19,026
  20,022
  21,069
  22,170
  23,327
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -3,660
  4,996
  5,025
  5,026
  4,998
  4,942
  4,855
  4,739
  4,593
  4,419
  4,147
  3,930
  3,692
  3,436
  3,167
  2,888
  2,605
  2,322
  2,045
  1,777
  1,523
  1,286
  1,069
  875
  703
  555
  430
  326
  242
  176
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

HP Inc. is a provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses, and enterprises, including customers in the government, health and education sectors. The Company provides personal computing and other access devices, imaging and printing products, and related technologies, solutions and services. Its segments include Personal Systems, Printing and Corporate Investments. The Personal Systems segment provides Commercial personal computers (PCs), Consumer PCs, workstations, thin clients, Commercial tablets and mobility devices, retail point-of-sale systems, displays and other accessories, software, support and services for the commercial and consumer markets. The Printing segment provides consumer and commercial printer hardware, supplies, media, solutions and services, as well as scanning devices. The Corporate Investments segment includes the operations of HP Labs and certain business incubation projects.

FINANCIAL RATIOS  of  HP (HPQ)

Valuation Ratios
P/E Ratio 14.9
Price to Sales 0.8
Price to Book -9.6
Price to Tangible Book
Price to Cash Flow 11.5
Price to Free Cash Flow 13.3
Growth Rates
Sales Growth Rate -6.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -88%
Cap. Spend. - 3 Yr. Gr. Rate -33%
Financial Strength
Quick Ratio 81
Current Ratio 0.1
LT Debt to Equity -173.2%
Total Debt to Equity -175.2%
Interest Coverage 13
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 4.7%
Return On Total Capital 12.6%
Ret/ On T. Cap. - 3 Yr. Avg. 11.3%
Return On Equity 20.9%
Return On Equity - 3 Yr. Avg. 18.7%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 18.7%
Gross Margin - 3 Yr. Avg. 19.3%
EBITDA Margin 9.1%
EBITDA Margin - 3 Yr. Avg. 13.5%
Operating Margin 7.4%
Oper. Margin - 3 Yr. Avg. 7.5%
Pre-Tax Margin 7.8%
Pre-Tax Margin - 3 Yr. Avg. 7.2%
Net Profit Margin 5.2%
Net Profit Margin - 3 Yr. Avg. 7.6%
Effective Tax Rate 29.1%
Eff/ Tax Rate - 3 Yr. Avg. 16.1%
Payout Ratio 34.4%

HPQ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HPQ stock intrinsic value calculation we used $48238 million for the last fiscal year's total revenue generated by HP. The default revenue input number comes from 2016 income statement of HP. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our HPQ stock valuation model: a) initial revenue growth rate of 6.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for HPQ is calculated based on our internal credit rating of HP, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of HP.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of HPQ stock the variable cost ratio is equal to 88.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2050 million in the base year in the intrinsic value calculation for HPQ stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.1% for HP.

Corporate tax rate of 27% is the nominal tax rate for HP. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the HPQ stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for HPQ are equal to 3.3%.

Life of production assets of 21.9 years is the average useful life of capital assets used in HP operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for HPQ is equal to -13.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-3889 million for HP - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1674.78 million for HP is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of HP at the current share price and the inputted number of shares is $36.5 billion.

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COMPANY NEWS

▶ 'Old Tech' Name IBM Reports Earnings Beat   [Oct-17-17 05:22PM  TheStreet.com]
▶ HP (HPQ) in Focus: Stock Moves 6.4% Higher   [Oct-16-17 08:46AM  Zacks]
▶ Monsanto up nearly 2%   [01:09PM  CNBC Videos]
▶ [$$] What's Old Is New Again at HP   [10:31AM  The Wall Street Journal]
▶ HP Inc. Gives Bullish 2018 Earnings Guidance   [Oct-12-17 09:24PM  Investor's Business Daily]
▶ [$$] HP Forecasts a Good 2018 for Profit   [07:58PM  The Wall Street Journal]
▶ DXC Technology acquiring Netherlands enterprise software firm   [Oct-10-17 09:46PM  American City Business Journals]
▶ Where Is HP Trading Compared to Analyst Estimates?   [Oct-06-17 07:37AM  Market Realist]
▶ How Currency Fluctuations Have Impacted HP   [07:39AM  Market Realist]
▶ 3 High-Yield Value Stocks for Conservative Investors   [Oct-04-17 09:02PM  Motley Fool]
▶ HP Stuns with the New Spectre Portfolio   [09:00AM  GlobeNewswire]
▶ 3 Dividend Stocks to Buy on Sale   [06:32AM  Motley Fool]
▶ What Is HPs Four Box Model?   [Oct-03-17 01:06PM  Market Realist]
▶ ETFs with exposure to HP, Inc. : September 28, 2017   [Sep-28-17 10:14AM  Capital Cube]
▶ Why HPE Could Lay off More Employees   [Sep-26-17 01:36PM  Market Realist]
▶ 3 Value Stocks for Bold Investors   [03:11PM  Motley Fool]
▶ THIS IS TEST2 FROM AMERS PLEASE IGNORE   [Sep-23-17 04:03AM  Reuters]
▶ HP Enterprise Layoffs: HPE to Cut 5,000 Jobs   [11:41AM  InvestorPlace]
▶ [$$] Hewlett Packard Enterprise to Cut 10% of Workforce   [12:18AM  The Wall Street Journal]
▶ [$$] Hewlett Packard Enterprise to Cut 10% of Workforce   [Sep-21-17 11:11PM  The Wall Street Journal]
▶ HP Expands 3D Printing Partner Program in Asia Pacific   [Sep-20-17 09:00PM  PR Newswire]
▶ Microsoft to Hold Mixed Reality Event in October   [Sep-18-17 08:03PM  Fortune]
▶ 3 Tech Stocks You Can Buy on Sale Now   [Sep-14-17 09:57PM  Motley Fool]
Financial statements of HPQ
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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