HP (HPQ) Stock After Recent Pullback Is The Valuation Gap Too Wide?

Make better investment decisions with Simply Wall St’s easy, visual tools that give you a competitive edge.

• If you are wondering whether HP stock still offers value at around US$22.88, the answer depends on how you look at its valuation and what you expect from the business over time.

• The share price is up 3.4% year to date, but it has fallen 2.8% over the past week, 15.4% over the past month and 1.7% over the last year, which may change how investors think about both its potential and its risks.

• Recent coverage has focused on HP’s position in the broader tech sector and how investors are weighing its PC and printing exposure against other opportunities, which helps frame these moves in context. As news flow continues to highlight how capital is rotating within technology, HP’s share price swings can be seen as part of a wider repricing of expectations.

• On Simply Wall St’s valuation checks, HP scores a 5 out of 6 valuation score. This suggests that several models currently point to undervaluation. The rest of this article will unpack those methods before finishing with an even more holistic way to think about what the stock might be worth.

Find out why HP’s -1.7% return over the last year is lagging behind its peers.

Approach 1: HP Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what HP might be worth by projecting its future cash flows and then discounting those back to today using a required rate of return. It focuses on the cash the company could return to shareholders over time, expressed in today’s dollars.

For HP, the latest twelve month Free Cash Flow is about $3.84b. Analysts and Simply Wall St projections for the next decade suggest Free Cash Flow figures generally in the $2.8b to $3.3b range each year, with 2030 specifically modeled at $3.10b. Only the first five years come from analyst estimates, while the later years are extrapolated by Simply Wall St based on the earlier data.

Using a 2 Stage Free Cash Flow to Equity model, these projected cash flows translate into an estimated intrinsic value of about $40.74 per share. Against the current share price of roughly $22.88, this implies HP stock trades at a 43.8% discount to the DCF estimate.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests HP is undervalued by 43.8%. Track this in your watchlist or portfolio, or discover 44 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for HP.

Approach 2: HP Price vs Earnings

For a profitable company like HP, the P/E ratio is a straightforward way to gauge what investors are currently paying for each dollar of earnings. It ties the share price directly to the bottom line, which is usually the starting point when you are comparing established businesses.

What counts as a “normal” P/E depends on how quickly earnings are expected to grow and how risky those earnings appear. Higher expected growth or lower perceived risk can justify a higher multiple, while slower growth or higher uncertainty often leads to a lower one.

HP currently trades on a P/E of about 8.20x. That is well below the Tech industry average of roughly 23.25x and the wider peer group average of around 45.27x. Simply Wall St’s Fair Ratio for HP is 26.84x. This Fair Ratio is a proprietary estimate of what P/E might be reasonable, based on factors such as earnings growth, profit margins, industry, market cap and company specific risks.

Compared with simple industry or peer averages, the Fair Ratio is more tailored to HP’s profile because it adjusts for those company level characteristics. With HP’s actual P/E of 8.20x sitting below the Fair Ratio of 26.84x, the stock screens as undervalued on this metric.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 20 top founder-led companies.

Upgrade Your Decision Making: Choose your HP Narrative

Earlier it was mentioned that there is an even better way to understand valuation, so this is where Narratives come in for HP, giving you a clear story behind the numbers such as Fair Value, and assumptions for future revenue, earnings and margins.

A Narrative is simply your structured view of HP, where you connect what you think will happen to the business to a set of financial forecasts, and then to a Fair Value that can be compared with the current share price.

On Simply Wall St’s Community page, Narratives are an accessible tool used by millions of investors, allowing you to pick or build a scenario that matches your expectations and see how that translates into a Fair Value estimate.

For HP, one investor might align with a more optimistic Narrative that uses the higher Fair Value of about US$29.60, based on earnings of US$3.2b and a future P/E of around 10.4x. Another might prefer a more cautious Narrative that uses the lower Fair Value of about US$16.00, tied to earnings of roughly US$2.4b and a future P/E near 7.4x. As new news or earnings arrive, these Narratives update automatically so you can keep comparing each Fair Value to the live market price and decide whether the stock still fits your view.

For HP, however, we will make it really easy for you with previews of two leading HP Narratives:

🐂 HP Bull Case

Fair Value: US$29.60

Implied discount vs HP’s recent share price of US$22.88: about 22.8% below this narrative fair value.

Revenue growth assumption: 115.46%

• Assumes HP’s focus on AI PCs, advanced compute solutions and the Humane CosmOS platform supports higher revenue and a lift in profit margins over time.

• Builds in ongoing cost savings of about US$1.9b and manufacturing diversification away from China as supportive for earnings resilience.

• Uses a Fair Value of US$29.60 that aligns with the most optimistic analyst group, who model higher earnings and a future P/E of about 10.4x.

🐻 HP Bear Case

Fair Value: US$16.00

Implied premium vs HP’s recent share price of US$22.88: about 43.0% above this narrative fair value.

Revenue growth assumption: 1.06% decline each year

• Assumes HP faces ongoing pricing pressure in PCs and printing, higher memory and component costs and softer consumer demand, which keep margins under strain.

• Builds in tariff and geopolitical risks plus slower structural cost savings, which could weigh on revenue and earnings compared with more optimistic scenarios.

• Uses a Fair Value of US$16.00 that aligns with the most cautious analyst group, who model lower earnings by 2029 and a future P/E of about 7.4x.

Together these Narratives bracket a wide but clearly defined valuation range for HP, from US$16.00 on the cautious side to US$29.60 on the optimistic side, and provide a structured way to decide which assumptions are closer to your own expectations for the stock.

To see how these Narratives, along with others from the community, translate into live Fair Values as new data comes through, head to the HP Community Narratives page and use it as a dashboard for how your view of the stock compares with the broader market story over time. See what the community is saying about HP

Do you think there’s more to the story for HP? Head over to our Community to see what others are saying!

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.

Companies discussed in this article include HPQ.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com