Intrinsic value of HP - HPQ

Previous Close

$22.02

  Intrinsic Value

$29.93

stock screener

  Rating & Target

buy

+36%

Previous close

$22.02

 
Intrinsic value

$29.93

 
Up/down potential

+36%

 
Rating

buy

*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 36.8

 

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
  9.80
  9.32
  8.89
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
Revenue, $m
  48,238
  52,965
  57,902
  63,048
  68,407
  73,981
  79,777
  85,801
  92,061
  98,566
  105,327
  112,357
  119,667
  127,273
  135,189
  143,433
  152,022
  160,975
  170,313
  180,055
  190,226
  200,847
  211,944
  223,543
  235,672
  248,357
  261,631
  275,524
  290,069
  305,302
  321,257
Variable operating expenses, $m
 
  46,819
  51,130
  55,625
  60,305
  65,173
  70,235
  75,496
  80,963
  86,645
  92,549
  98,126
  104,511
  111,153
  118,067
  125,267
  132,768
  140,587
  148,742
  157,251
  166,133
  175,409
  185,101
  195,231
  205,823
  216,902
  228,494
  240,628
  253,331
  266,634
  280,568
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
  48,920
  53,284
  57,833
  62,568
  67,492
  72,612
  77,933
  83,461
  89,205
  95,173
  100,816
  107,268
  113,979
  120,964
  128,236
  135,811
  143,706
  151,939
  160,528
  169,492
  178,852
  188,630
  198,848
  209,531
  220,703
  232,390
  244,621
  257,424
  270,829
  284,868
Operating income, $m
  3,549
  4,045
  4,618
  5,215
  5,839
  6,488
  7,165
  7,868
  8,600
  9,362
  10,154
  11,541
  12,399
  13,294
  14,226
  15,197
  16,211
  17,269
  18,374
  19,528
  20,734
  21,995
  23,315
  24,695
  26,141
  27,655
  29,241
  30,903
  32,646
  34,473
  36,389
EBITDA, $m
  3,881
  4,687
  5,267
  5,873
  6,504
  7,162
  7,847
  8,560
  9,301
  10,072
  10,875
  11,710
  12,580
  13,486
  14,429
  15,414
  16,440
  17,512
  18,630
  19,799
  21,020
  22,298
  23,634
  25,032
  26,496
  28,029
  29,635
  31,319
  33,083
  34,933
  36,873
Interest expense (income), $m
  318
  276
  -149
  -63
  26
  119
  216
  317
  421
  530
  643
  760
  882
  1,009
  1,141
  1,279
  1,422
  1,571
  1,727
  1,889
  2,058
  2,235
  2,419
  2,612
  2,813
  3,024
  3,244
  3,475
  3,716
  3,968
  4,233
Earnings before tax, $m
  3,761
  3,769
  4,766
  5,279
  5,813
  6,369
  6,949
  7,551
  8,179
  8,831
  9,511
  10,780
  11,517
  12,284
  13,084
  13,919
  14,789
  15,698
  16,647
  17,639
  18,676
  19,760
  20,895
  22,084
  23,328
  24,631
  25,997
  27,429
  28,930
  30,504
  32,156
Tax expense, $m
  1,095
  1,018
  1,287
  1,425
  1,569
  1,720
  1,876
  2,039
  2,208
  2,384
  2,568
  2,911
  3,110
  3,317
  3,533
  3,758
  3,993
  4,238
  4,495
  4,762
  5,042
  5,335
  5,642
  5,963
  6,299
  6,650
  7,019
  7,406
  7,811
  8,236
  8,682
Net income, $m
  2,496
  2,751
  3,479
  3,853
  4,243
  4,650
  5,072
  5,513
  5,970
  6,447
  6,943
  7,870
  8,407
  8,968
  9,552
  10,161
  10,796
  11,459
  12,152
  12,876
  13,633
  14,425
  15,254
  16,121
  17,029
  17,981
  18,978
  20,023
  21,119
  22,268
  23,474

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
  24,925
  27,248
  29,670
  32,191
  34,815
  37,542
  40,377
  43,323
  46,384
  49,566
  52,874
  56,314
  59,893
  63,618
  67,498
  71,540
  75,753
  80,147
  84,732
  89,518
  94,516
  99,739
  105,197
  110,904
  116,874
  123,121
  129,658
  136,503
  143,671
  151,180
Adjusted assets (=assets-cash), $m
  22,699
  24,925
  27,248
  29,670
  32,191
  34,815
  37,542
  40,377
  43,323
  46,384
  49,566
  52,874
  56,314
  59,893
  63,618
  67,498
  71,540
  75,753
  80,147
  84,732
  89,518
  94,516
  99,739
  105,197
  110,904
  116,874
  123,121
  129,658
  136,503
  143,671
  151,180
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
  1,748
  1,911
  2,081
  2,257
  2,441
  2,633
  2,831
  3,038
  3,253
  3,476
  3,708
  3,949
  4,200
  4,461
  4,733
  5,017
  5,312
  5,620
  5,942
  6,277
  6,628
  6,994
  7,377
  7,777
  8,196
  8,634
  9,092
  9,572
  10,075
  10,601
Working capital, $m
  -340
  -7,203
  -7,875
  -8,575
  -9,303
  -10,061
  -10,850
  -11,669
  -12,520
  -13,405
  -14,325
  -15,281
  -16,275
  -17,309
  -18,386
  -19,507
  -20,675
  -21,893
  -23,163
  -24,488
  -25,871
  -27,315
  -28,824
  -30,402
  -32,051
  -33,777
  -35,582
  -37,471
  -39,449
  -41,521
  -43,691
Total debt, $m
  6,813
  -3,631
  -1,540
  640
  2,909
  5,270
  7,725
  10,276
  12,928
  15,683
  18,546
  21,523
  24,619
  27,841
  31,194
  34,685
  38,323
  42,115
  46,069
  50,196
  54,503
  59,002
  63,702
  68,614
  73,751
  79,124
  84,745
  90,630
  96,790
  103,241
  109,999
Total liabilities, $m
  32,876
  22,432
  24,523
  26,703
  28,972
  31,333
  33,788
  36,339
  38,991
  41,746
  44,609
  47,586
  50,682
  53,904
  57,257
  60,748
  64,386
  68,178
  72,132
  76,259
  80,566
  85,065
  89,765
  94,677
  99,814
  105,187
  110,808
  116,693
  122,853
  129,304
  136,062
Total equity, $m
  -3,889
  2,492
  2,725
  2,967
  3,219
  3,481
  3,754
  4,038
  4,332
  4,638
  4,957
  5,287
  5,631
  5,989
  6,362
  6,750
  7,154
  7,575
  8,015
  8,473
  8,952
  9,452
  9,974
  10,520
  11,090
  11,687
  12,312
  12,966
  13,650
  14,367
  15,118
Total liabilities and equity, $m
  28,987
  24,924
  27,248
  29,670
  32,191
  34,814
  37,542
  40,377
  43,323
  46,384
  49,566
  52,873
  56,313
  59,893
  63,619
  67,498
  71,540
  75,753
  80,147
  84,732
  89,518
  94,517
  99,739
  105,197
  110,904
  116,874
  123,120
  129,659
  136,503
  143,671
  151,180
Debt-to-equity ratio
  -1.752
  -1.460
  -0.570
  0.220
  0.900
  1.510
  2.060
  2.550
  2.980
  3.380
  3.740
  4.070
  4.370
  4.650
  4.900
  5.140
  5.360
  5.560
  5.750
  5.920
  6.090
  6.240
  6.390
  6.520
  6.650
  6.770
  6.880
  6.990
  7.090
  7.190
  7.280
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
  2,751
  3,479
  3,853
  4,243
  4,650
  5,072
  5,513
  5,970
  6,447
  6,943
  7,870
  8,407
  8,968
  9,552
  10,161
  10,796
  11,459
  12,152
  12,876
  13,633
  14,425
  15,254
  16,121
  17,029
  17,981
  18,978
  20,023
  21,119
  22,268
  23,474
Depreciation, amort., depletion, $m
  332
  642
  649
  657
  665
  674
  682
  691
  701
  711
  721
  169
  180
  192
  204
  216
  229
  243
  257
  271
  287
  303
  319
  337
  355
  374
  394
  415
  437
  460
  484
Funds from operations, $m
  2,893
  3,393
  4,129
  4,511
  4,909
  5,323
  5,755
  6,204
  6,671
  7,158
  7,664
  8,039
  8,588
  9,159
  9,755
  10,377
  11,025
  11,702
  12,409
  13,148
  13,920
  14,728
  15,573
  16,458
  17,384
  18,355
  19,372
  20,438
  21,556
  22,728
  23,958
Change in working capital, $m
  -337
  -643
  -671
  -700
  -729
  -758
  -788
  -819
  -851
  -885
  -920
  -956
  -994
  -1,034
  -1,077
  -1,121
  -1,168
  -1,218
  -1,270
  -1,325
  -1,383
  -1,445
  -1,509
  -1,577
  -1,649
  -1,725
  -1,805
  -1,889
  -1,978
  -2,072
  -2,170
Cash from operations, $m
  3,230
  4,036
  4,800
  5,211
  5,637
  6,081
  6,543
  7,023
  7,523
  8,042
  8,583
  8,995
  9,582
  10,194
  10,832
  11,498
  12,193
  12,920
  13,679
  14,473
  15,303
  16,172
  17,082
  18,035
  19,034
  20,080
  21,177
  22,328
  23,534
  24,800
  26,128
Maintenance CAPEX, $m
  0
  -74
  -80
  -87
  -95
  -103
  -111
  -120
  -129
  -139
  -149
  -159
  -169
  -180
  -192
  -204
  -216
  -229
  -243
  -257
  -271
  -287
  -303
  -319
  -337
  -355
  -374
  -394
  -415
  -437
  -460
New CAPEX, $m
  -433
  -134
  -163
  -170
  -177
  -184
  -191
  -199
  -207
  -215
  -223
  -232
  -241
  -251
  -261
  -272
  -283
  -295
  -308
  -322
  -336
  -351
  -366
  -383
  -400
  -419
  -438
  -458
  -480
  -503
  -527
Cash from investing activities, $m
  48
  -208
  -243
  -257
  -272
  -287
  -302
  -319
  -336
  -354
  -372
  -391
  -410
  -431
  -453
  -476
  -499
  -524
  -551
  -579
  -607
  -638
  -669
  -702
  -737
  -774
  -812
  -852
  -895
  -940
  -987
Free cash flow, $m
  3,278
  3,829
  4,558
  4,953
  5,366
  5,794
  6,240
  6,704
  7,187
  7,689
  8,212
  8,604
  9,171
  9,762
  10,379
  11,022
  11,694
  12,395
  13,128
  13,894
  14,696
  15,535
  16,413
  17,333
  18,297
  19,307
  20,365
  21,475
  22,639
  23,860
  25,141
Issuance/(repayment) of debt, $m
  -2,087
  -10,366
  2,091
  2,180
  2,270
  2,361
  2,455
  2,551
  2,651
  2,755
  2,864
  2,977
  3,096
  3,221
  3,353
  3,492
  3,638
  3,792
  3,955
  4,126
  4,307
  4,498
  4,700
  4,913
  5,137
  5,373
  5,622
  5,884
  6,160
  6,451
  6,758
Issuance/(repurchase) of shares, $m
  -1,113
  9,840
  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
  -526
  2,091
  2,180
  2,270
  2,361
  2,455
  2,551
  2,651
  2,755
  2,864
  2,977
  3,096
  3,221
  3,353
  3,492
  3,638
  3,792
  3,955
  4,126
  4,307
  4,498
  4,700
  4,913
  5,137
  5,373
  5,622
  5,884
  6,160
  6,451
  6,758
Total cash flow (excl. dividends), $m
  -10,287
  3,303
  6,648
  7,133
  7,635
  8,155
  8,695
  9,256
  9,838
  10,444
  11,075
  11,581
  12,267
  12,984
  13,732
  14,514
  15,331
  16,187
  17,083
  18,021
  19,004
  20,034
  21,113
  22,246
  23,433
  24,679
  25,987
  27,359
  28,799
  30,311
  31,899
Retained Cash Flow (-), $m
  31,657
  -12,591
  -232
  -242
  -252
  -262
  -273
  -283
  -295
  -306
  -318
  -331
  -344
  -358
  -373
  -388
  -404
  -421
  -439
  -458
  -479
  -500
  -522
  -546
  -571
  -597
  -625
  -654
  -684
  -717
  -751
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
 
  -3,078
  6,416
  6,891
  7,383
  7,893
  8,422
  8,972
  9,544
  10,138
  10,757
  11,251
  11,923
  12,626
  13,359
  14,126
  14,927
  15,766
  16,643
  17,562
  18,525
  19,534
  20,591
  21,700
  22,863
  24,082
  25,362
  26,705
  28,115
  29,594
  31,148
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
 
  -2,951
  5,874
  5,997
  6,079
  6,118
  6,112
  6,061
  5,965
  5,824
  5,640
  5,343
  5,088
  4,801
  4,485
  4,147
  3,793
  3,430
  3,065
  2,704
  2,354
  2,020
  1,709
  1,422
  1,164
  937
  740
  573
  435
  323
  235
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 15.1
Price to Sales 0.8
Price to Book -9.7
Price to Tangible Book
Price to Cash Flow 11.7
Price to Free Cash Flow 13.5
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 9.8% 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 1670.3 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 $36.8 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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