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A Look at HP’s Valuation Compared to Its Peers

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Aug. 13 2018, Updated 4:15 p.m. ET

Valuation ratios

HP (HPQ) has an expected market-cap-to-revenue ratio of 0.67x for fiscal 2018 and 0.67x for fiscal 2019. Its EV[1. enterprise value]-to-revenue ratio is expected to be 0.69x in 2018 and 0.66x in 2019, while its EV-to-EBITDA ratio is expected to be 8.44x in 2018 and 7.91x in 2019.

Its PE ratio is 8.61x, which is the lowest compared to Apple, Western Digital (WDC), and Seagate Technology (STX) with ratios of 17.7x, 9.98x, and 8.91x, respectively, in their current fiscal years.

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Profitability

Analysts expect HP’s operating margin to be 7.4% in 2018 and rise to 7.6% in 2019. Its net margin is expected to be 8% in 2018 and 5.7% in 2019. Its return on assets is expected to be 12.2% in 2018 and 9.4% in 2019. The returns on assets for Apple, WDC, and Seagate are 16%, 8.4%, and 15.6%, respectively.

Balance sheet analysis

HP’s capex-to-current-assets ratio is expected to be 0.75% in 2018 and 0.81% in 2019. Its cash-flow-to-sales ratio is expected to be 7% in 2018 and could fall to 6.9% in 2019.

Dividend yield

HP has a dividend yield of 2.3%, indicating an annualized payout of $0.56 per share and a payout ratio of 27.9%. The dividend yields of Apple, WDC, and Seagate are 1.4%, 3%, and 5%, respectively. HP has increased its dividend yield 7% over the last year.

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