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How HP Inc.’s Valuation Stacks Up to Its Peers’

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Nov. 21 2018, Updated 4:45 p.m. ET

PE ratio

We’ve already seen that HP Inc.’s (HPQ) revenue is expected to rise 11.8% in fiscal 2018 and 2% in fiscal 2019. The company’s EPS are expected to rise 22.4% in fiscal 2018 and 8.4% in fiscal 2019. In comparison, its estimated forward PE ratio is 8.44x for fiscal 2018 and 11.4x for fiscal 2019.

HP Inc. stock isn’t that overvalued considering its robust earnings growth rate. The PE ratios of peers Western Digital (WDC), Seagate (STX), and IBM (IBM) in their current years stand at 21.8x, 8.98x, and 10.4x, respectively.

WDC, Seagate, and IBM currently have revenue growths of -14.8%, -4.5%, and 0.70%, respectively. While WDC’s EPS are expected to fall 50.4% this year, Seagate’s and IBM’s EPS are expected to rise -6.5% and 1%, respectively.

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ROA

HP Inc.’s expected ROA (return on assets) is 12.1% for fiscal 2018 and 9.8% for fiscal 2019. The ROAs of WDC, Seagate, and IBM for 2018 are expected to be 6.8%, 15.2%, and 9.50%, respectively.

Market cap-to-revenue ratio

HP Inc. is trading at a market cap-to-revenue ratio of 0.66x and an EV-to-EBITDA (enterprise value-to-EBITDA) ratio of 8.31x. WDC has a market cap-to-revenue ratio of 0.77x, while its EV-to-EBITDA ratio is 4.05x. Seagate’s market cap-to-revenue ratio stands at 1.16x, while its EV-to-EBITDA ratio is 6.37x. IBM has a market-cap-to-revenue ratio of 1.39x, while its EV-to-EBITDA ratio is 7.52x.

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