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A Look at HP’s Valuation Multiples

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Feb. 15 2018, Updated 9:02 a.m. ET

Price-to-earnings ratio

HP (HPQ) is trading at a forward PE (price-to-earnings ratio) of 11.35x, which is similar to the peer average of 11.30x. Peer companies Apple (AAPL), Western Digital (WDC), Seagate (STX), and Samsung (SSNLF) have forward PEs of 14.23x, 5.95x, 10.2x, and 6.69x, respectively.

Now let’s look at HP’s EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) ratio estimates. HP is trading at a forward EV-to-EBITDA ratio of 7.47x, which is higher the peer average of 6.82x. Apple is trading above the average at 10.88x, while WDC, Seagate, and Samsung have ratios of 4.15x, 7.20x, and 3.26x, respectively.

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EBITDA margin

HP’s EBITDA margin is 8%. The margins of Apple, WDC, and Seagate are 31%, 27%, and 18%, respectively. The estimated EBITDA growth rate for HP is -6%. The estimated growth rates for WDC, Seagate, and Apple are -17%, -8%, and -12%, respectively.

Debt-to-EV ratio

HP has a debt-to-EV ratio of 23%. The ratios of Apple, WDC, and Seagate are 14%, 40%, and 29%, respectively. HP has a price-to-sales ratio of 0.65x and an estimated price-to-sales ratio of 0.63x. The estimated price-to-sales ratios of its peers Apple, WDC, and Samsung stand at 3.17x, 1.21x, and 1.43x, respectively.

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