HP (HPQ) Stock Could Be 32% Undervalued As Cash Flow Holds Up
HP stock has logged a strong run so far this year, yet both its Discounted Cash Flow (DCF) intrinsic value estimate and market multiples still point to a market price that sits below what the underlying cash flows may justify.
- Year to date, HP is up 48.0%, which means anyone looking at the chart alone may underestimate how much upside the valuation models still flag.
- The key support for that view comes from expectations that HP can keep converting earnings into solid free cash flow, while the main risk is that any pressure on hardware demand or pricing weakens those cash flows and erodes the implied discount.
- On a broad set of valuation checks, HP screens as cheap, with a high value score of 5, which means most measures point to an undervalued stock rather than one fully priced for its fundamentals.
The issue now is whether HP’s current share price already reflects this intrinsic value gap or if there is still a meaningful discount once the cash flow assumptions are weighed against the risks.
Scan beyond HP’s 48.0% year to date run and compare it with other undervalued candidates across our hand picked list of 33 high quality undervalued stocks.
Is HP a Bargain on Cash Flow?
The Discounted Cash Flow (DCF) model here is built around the cash HP can plausibly return to shareholders over time. Over the last twelve months, the business generated about $3.9b in free cash flow, and the forecast path assumes that these cash flows trend slightly lower rather than banking on aggressive expansion.
On those assumptions, the model points to an estimated intrinsic value of about $48.46 per share. Against the current market price, that implies roughly a 32.5% discount. This indicates that the market valuation is well below what the projected cash generation suggests for HP if those cash flows materialize as modeled.
On this DCF view, HP stock appears undervalued relative to the cash it is expected to generate over time.
Our Discounted Cash Flow (DCF) analysis suggests HP is undervalued by 32.5%. Track this in your watchlist or portfolio, or discover 33 more high quality undervalued stocks.
Is HP a Bargain on Earnings?
P/E fits HP well because earnings remain a key lens for a mature, cash generative hardware and printing business. On this measure, HP trades on about 12.0x earnings, which is below the broader tech sector average of roughly 19.8x and far under a peer group sitting near 47.0x.
The fair P/E that accounts for HP’s size, risk profile and profitability sits near 26.3x. This is more than double the current multiple. This suggests the market is applying a heavy discount to the stock even after the recent share price strength.
On the P/E yardstick, HP stock appears undervalued relative to both its industry and the fair multiple implied by the model.
See what the numbers say about this price — find out in our valuation breakdown.
The HP Narrative: What Would Justify Today's Price?
Simply Wall St Narratives take HP’s valuation puzzle and spell out what would need to happen to growth, margins and earnings for the shares to be worth materially more or less than today’s price, and they sit on the stock’s Community page. Each scenario links a fair value estimate to a particular path for HP’s catalysts and risks so you can see which storyline is starting to match real outcomes over time.
Community views on HP could hardly be further apart, with one side leaning into AI and cost savings while the other fixates on print and PC headwinds.
Bull case: 38% undervalued
"HP's acquisition of Humane and integration of their AI-powered platform CosmOS is expected to accelerate the development of an intelligent ecosystem across HP's devices…"
Read the full Bull Case to see why HP could be undervalued
Bear case: 40% overvalued
"HP's core Print segment continues to face structural headwinds, with both consumer and commercial hardware revenue declining year-over-year and management projecting ongoing low single digit declines…"
Read the full Bear Case to see why HP could be overvalued
Do you think there's more to the story for HP? Head over to our Community to see what others are saying!
The Bottom Line
On balance, HP screens as undervalued, with both the Discounted Cash Flow (DCF) work and the earnings multiples pointing in the same direction rather than fighting each other. The intrinsic value estimate sits above the current share price, while the P/E gap to peers suggests the market is still cautious on the durability of cash generation. What really decides the outcome from here is whether HP can keep turning earnings into reliable free cash flow in the face of any hardware or print pressure. That is the crux separating a potential value opportunity from a discount that simply reflects ongoing business risk.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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