HP Inc.: Market-leading portfolios in the PC and print categories

HP Inc. is a global leader in personal computing and printing, with market-leading portfolios across both categories and a large installed base spanning consumers, enterprises, and public institutions. Supported by strong operational capabilities, disciplined cost control, and a shareholder-friendly capital return strategy, management believes the company is well positioned to drive profitable growth in its core markets while capturing opportunities in higher-value areas such as AI PCs, services, and subscriptions. The question remains: does this established technology leader offer an attractive investment opportunity today?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me.

For full disclosure, I should mention that I do not own any shares in HP at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of HP, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

HP Inc. is a global technology hardware company focused on personal computing and printing. It was formed in 2015 following the split of Hewlett-Packard into HP Inc. and Hewlett Packard Enterprise. Headquartered in California, HP operates in more than 170 countries and generates over $55 billion in annual revenue, making it one of the largest players in global IT hardware. The company operates through three reportable segments: Personal Systems, Printing, and Corporate Investments, with Corporate Investments contributing an immaterial share of revenue. Personal Systems is the volume engine of the company. It includes commercial and consumer PCs, notebooks, workstations, thin clients, point-of-sale systems, displays, peripherals, software, and lifecycle services. The commercial side serves enterprises, SMBs, and the public sector with secure, manageable devices and services, while the consumer side focuses on gaming, remote work, education, and entertainment. HP follows a multi-OS and multi-architecture strategy, primarily using Windows and Chrome OS, with processors from Intel and AMD and GPUs from NVIDIA. Printing is HP’s profit anchor. The segment spans consumer and office printers, supplies, services, large-format graphics, industrial printing, 3D printing, and personalization solutions. While hardware sales are structurally mature, the segment benefits from high-margin recurring revenue from ink, toner, and industrial consumables. HP is actively transitioning the business toward subscription and services-based models, such as Instant Ink and managed print services, to stabilize volumes and extend customer lifetime value. Graphics and 3D printing address more specialized industrial applications, offering long-term optionality beyond traditional office and home printing. Corporate Investments focuses on incubation projects and strategic investments but plays a negligible role in the current financial profile. HP’s competitive moat is built on a trusted global brand with a large installed base, strong scale advantages in manufacturing and sourcing, deep relationships with enterprise customers and IT channels, differentiated hardware-level security, proprietary printing technology, and growing recurring revenue from supplies and subscriptions. HP is one of the most recognized and trusted brands in global computing and printing. Decades of presence across enterprises, governments, schools, and households have created a massive installed base. This brand equity reduces customer acquisition costs, supports repeat purchases, and reinforces long-term relationships, particularly in conservative enterprise IT environments where reliability and service continuity matter more than marginal price differences. HP’s scale is a major defensive moat. Shipping tens of millions of PCs and printers annually gives the company significant purchasing power with key component suppliers such as Intel, AMD, NVIDIA, and memory manufacturers. This scale advantage is especially valuable during periods of component price inflation or supply constraints, allowing HP to protect margins better than smaller competitors. HP has deeply embedded relationships with managed service providers, value-added resellers, and corporate IT departments built over decades. Enterprises tend to standardize hardware fleets to minimize complexity and risk. HP’s lifecycle services, deployment capabilities, and long-standing channel partnerships make switching costly and operationally disruptive, reinforcing customer stickiness in the commercial segment. Security has become a meaningful point of differentiation for HP. Its hardware-enforced security features, such as BIOS-level protection and the Wolf Security suite, appeal to enterprises managing increasingly distributed workforces. By embedding security directly into devices rather than relying solely on software, HP strengthens its position as a default vendor for large organizations with strict security requirements. The printing business is protected by a substantial portfolio of patents covering printhead technology, ink chemistry, and industrial printing processes. This intellectual property makes it difficult for third-party suppliers to fully replicate the quality and reliability of original HP supplies. As a result, HP continues to earn attractive margins from consumables despite competitive pressure and gradual declines in overall print volumes. HP’s growing focus on subscriptions and services, particularly in printing, increases revenue visibility and customer retention. Programs like Instant Ink shift customer behavior away from transactional purchases toward ongoing relationships, reinforcing switching costs and smoothing cash flows.

Management

Enrique Lores serves as the CEO of HP Inc., a position he assumed in November 2019 after a three-decade career within the company. He originally joined HP in 1989 as an engineering intern and steadily advanced through a wide range of leadership roles across engineering, strategy, operations, and business management. Enrique Lores holds a bachelor’s degree in electrical engineering from the Polytechnic University of Valencia and an MBA from Esade Business School. In addition to his role at HP, he serves on the Board of Directors of PayPal, providing him with exposure to global digital platforms and consumer technology trends. Enrique Lores was a central architect of the 2015 separation of Hewlett-Packard Company, one of the most complex corporate breakups in modern business history. Following the split, he played a key role in reshaping HP’s operating model, driving cost discipline, simplifying the organization, and reallocating resources toward innovation and higher-return opportunities. These efforts materially improved HP’s profitability, cash generation, and strategic focus, laying the foundation for a more resilient standalone company. As CEO, Enrique Lores has focused on positioning HP for long-term relevance in a rapidly changing technology landscape. His leadership has emphasized portfolio evolution toward higher-growth areas such as gaming, peripherals, services, and AI-enabled personal computing, while simultaneously protecting the company’s strong cash flows from printing. He has also overseen HP’s push into subscription-based and recurring revenue models, particularly in printing, as well as investments in security, hybrid work solutions, and digital services. Enrique Lores is known for his decisiveness and willingness to act in the face of external pressure. Most notably, he successfully defended HP against a hostile takeover attempt by Xerox Holdings, supported by activist investor Carl Icahn, reinforcing HP’s strategic independence and long-term shareholder interests. He has also demonstrated a readiness to pursue targeted acquisitions, such as HyperX, reflecting a clear belief in the growth potential of gaming, peripherals, and adjacent ecosystems. Beyond strategy and capital allocation, Enrique Lores places strong emphasis on culture and talent development. He is widely regarded as a leader who combines deep institutional knowledge with a forward-looking mindset, fostering accountability, innovation, and operational discipline across the organization. His leadership has been recognized externally, including being named one of Barron’s Top CEOs in 2022, and internally, with strong employee approval scores that rank him among the top CEOs at companies of similar size. Overall, I believe Enrique Lores is the right leader for HP Inc. His deep understanding of the company, proven ability to execute complex transformations, disciplined approach to capital allocation, and willingness to make difficult strategic decisions position him well to guide HP through both cyclical challenges and long-term structural change.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. HP has historically delivered very high ROIC mainly because of how its business is structured. The company is asset-light, meaning it does not need to own large factories or heavy infrastructure, which keeps the amount of capital tied up in the business relatively low. At the same time, the printing business has long generated strong and stable profits, especially from ink and toner, where customers repeatedly buy supplies for years after purchasing a printer. This combination of steady cash generation and a small capital base naturally led to very high ROIC in earlier years. Share buybacks after the 2015 split further reduced the capital base, which mechanically pushed ROIC even higher. Over the past four years, ROIC has come down, but it remains high in absolute terms. This decline is largely explained by changes in the operating environment rather than a deterioration in HP’s underlying economics. The PC market experienced an exceptional boom during the pandemic followed by a sharp slowdown, which hurt margins and forced HP to hold more inventory than usual. At the same time, the company deliberately increased investments in areas such as gaming, peripherals, security, services, and AI-enabled PCs. These initiatives require upfront spending and temporarily increase the capital tied up in the business, while the benefits take time to show up. In printing, HP is also transitioning from a pure cartridge-driven model to subscriptions and services, which improves long-term stability but is less immediately profitable than the legacy model at its peak. ROIC reached its lowest point in fiscal year 2025 because several of these pressures overlapped. PC pricing remained competitive, margins were still recovering, and investments made in earlier years had not yet fully translated into higher profits. Printing volumes continued to decline, while HP kept investing in subscriptions, security, and industrial printing. As a result, profits were temporarily lower while the capital employed in the business was higher than usual, pulling ROIC down for the year. Looking ahead, ROIC is unlikely to return to the exceptionally high levels seen earlier in the decade, but it should remain well above average for a hardware company. As PC demand normalizes, AI-enabled devices scale, and inventory levels come down, profitability should gradually improve. Printing is likely to remain a strong cash generator despite structural volume declines, supported by subscriptions and services. Combined with HP’s disciplined cost control, continued share buybacks, and asset-light model, this suggests that ROIC should stay structurally high over a full cycle, even if it remains more volatile and lower than past peaks.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. HP’s equity has been negative in many years mainly because of deliberate choices made after the 2015 split. Over time, HP returned more value to shareholders than it added back to the balance sheet through profits. This gradually reduced the amount of equity left inside the company and, in several years, pushed it below zero. Importantly, this did not happen because HP was unprofitable, but because the company chose to run with a very lean balance sheet while continuing to generate strong cash flows. The large swings from year to year are a direct result of equity starting from a very low or negative level. When equity is already close to zero, even relatively small changes in profits, costs, or balance sheet items can create very large percentage moves. In some years, strong results and fewer one-off charges caused equity to jump sharply. In other years, weaker operating conditions or restructuring efforts pushed it down again. These swings look dramatic in percentage terms, but they exaggerate what are often fairly normal changes in the underlying business. Equity reached its highest positive level in fiscal year 2025 because the business became more stable at the same time as earlier pressures eased. Profits improved compared with the prior year, and fewer exceptional costs weighed on results. With earnings adding back to the balance sheet and fewer factors pulling equity down, the combined effect was a sharp rebound into positive territory. This reflects normalization rather than a fundamental shift in HP’s business model. Looking ahead, equity is likely to remain relatively small and somewhat volatile, but more stable than in the past. HP’s business generates solid cash flows and does not require a large equity base to operate. As long as profitability remains intact and the company avoids extreme balance sheet actions, equity should stay around modest positive levels rather than swing deeply negative again.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. HP’s free cash flow profile stands out for its consistency. The company has generated positive free cash flow every single year over the past decade, which reflects a business that converts profits into cash reliably, even through weak PC cycles, supply chain disruptions, and structural pressure in printing. This consistency is one of HP’s key financial strengths. That said, free cash flow reached its lowest level in fiscal year 2025. This was not the result of a single problem, but rather the combined effect of several pressures happening at the same time. PC margins remained under pressure as the market continued to normalize after the pandemic boom, memory costs increased, and pricing stayed competitive. At the same time, HP continued to invest in areas such as AI PCs, gaming, services, and security, while also carrying higher operating costs from earlier restructuring and transformation efforts. These factors reduced cash generation in the short term, even though the business remained solidly cash positive. The decline in free cash flow margins in fiscal year 2025 follows the same logic. Lower profitability in PCs, combined with ongoing investments and a more competitive environment, meant that each dollar of revenue translated into less cash than in prior years. Importantly, this reflects a cyclical low point rather than a breakdown in HP’s ability to generate cash over time. Looking ahead, free cash flow is expected to stabilize and gradually improve rather than rebound sharply. Management has guided for free cash flow of roughly $2,8 to $3,0 billion in fiscal year 2026, which suggests a flat to slightly better outcome compared with fiscal year 2025. Improvements are expected to come from better cost control, lower restructuring spending, more stable PC demand, and continued efficiency gains as inventories and operations normalize. While higher component costs remain a headwind, these are expected to be partly offset by operational improvements. HP’s use of free cash flow is very clear and disciplined. The company is committed to returning around 100% of free cash flow to shareholders over time, as long as debt remains under control and no better opportunities are available. In practice, this means a combination of dividends and share repurchases, with management showing a clear preference for buybacks when the stock is attractively priced. At the same time, HP retains enough flexibility to invest in targeted growth areas and maintain a lean but functional balance sheet. The free cash flow yield points to an attractive share price, but we will revisit valuation in more detail later in the analysis.

Debt

Another important aspect to consider is HP’s level of debt. I assess whether a company’s debt is manageable by comparing total long-term debt with earnings, using a three-year payback period as a reference point. Based on this approach, HP currently has around 3,55 years’ worth of earnings in debt, which is slightly above my preferred threshold and therefore worth monitoring. That said, this appears to be a temporary deviation rather than a structural issue. Since the 2015 separation, HP has maintained a debt-to-earnings ratio below three years in every other period, reflecting a generally disciplined approach to leverage. Management has also been clear about its intentions. While leverage is currently slightly above its target, HP has deliberately built up cash reserves to cover upcoming debt maturities, including obligations due in 2026, while still retaining the flexibility to repurchase shares. Importantly, management has emphasized its commitment to maintaining its current credit rating and has stated that it is prepared to operate with higher cash balances in fiscal 2026 if needed to further reduce debt tied to future maturities. This suggests that the current leverage level is being actively managed rather than allowed to drift higher. Overall, while HP’s debt level is marginally above my comfort zone today, the company’s track record, strong cash generation, and proactive balance sheet management indicate that debt is unlikely to become a long-term concern.

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Risks

Competition is a risk for HP because the markets it operates in are highly competitive, fast-moving, and structurally prone to pricing pressure. Both of HP’s core businesses Personal Systems and Printing face competitors with strong brands, deep resources, and the ability to compete aggressively on price, features, and distribution, which limits HP’s room for error. In Personal Systems, HP competes with global players such as Apple, Dell, Lenovo, and Microsoft, alongside regional and white-box manufacturers. This market is characterized by short product cycles and frequent launches of new models, which means HP must constantly refresh its lineup just to maintain relevance. Competition is particularly intense on price, especially during periods of weaker demand, when vendors discount heavily to protect volumes. This dynamic can quickly compress margins if HP is unable to differentiate its products sufficiently through design, performance, security, or bundled services. The Printing segment, while more profitable, is also highly competitive and arguably more vulnerable over time. HP faces established rivals such as Canon, Seiko Epson, and Xerox, as well as a large and growing ecosystem of third-party ink and toner suppliers. These non-original supplies are often sold at much lower prices and directly undermine HP’s most profitable revenue stream. Even when HP’s original supplies offer better quality and reliability, many customers prioritize cost, especially in consumer and small business segments. Online and omnichannel retailers often highlight these cheaper alternatives next to HP’s products, further intensifying price pressure. Competition is also increasing due to external factors beyond product features. Currency movements, particularly the weak Japanese yen, have given Japanese printer manufacturers a structural cost advantage, allowing them to price more aggressively in global markets. HP has acknowledged that this has already led to market share losses in certain periods and expects this pressure to persist. At the same time, industry consolidation could create larger and more efficient competitors with greater scale advantages, making it harder for HP to defend its position without sacrificing margins. Finally, HP operates in an environment where many partners can also become competitors. Some manufacturers and suppliers design their own branded products, and alliance partners may shift their focus or form relationships with competing vendors.

Macroeconomic factors are a risk for HP because its business is closely tied to global economic conditions and consumer and corporate spending cycles. HP sells products that are often discretionary, such as personal computers and printers, which makes demand highly sensitive to economic slowdowns, recessions, and periods of heightened uncertainty. When consumers become more cautious or businesses delay IT investments, PC refresh cycles slow and printer purchases are postponed, directly reducing volumes across HP’s core markets. Inflation adds further pressure by increasing the cost of key components and materials. HP has highlighted rising memory prices as a notable headwind, with memory accounting for a meaningful share of the cost of a typical PC. When these costs rise rapidly, HP cannot always fully pass them on to customers without hurting demand in a price-sensitive market. As a result, higher input costs can compress margins, as seen in recent years when elevated commodity and component prices weighed on profitability. Trade policy and tariffs are another important macroeconomic risk. HP has already absorbed significant tariff-related costs in recent years, and renewed trade tensions increase the risk of further cost inflation. Because parts of HP’s supply chain remain exposed to Asia, particularly China and Taiwan, new or expanded tariffs directly raise costs. While HP is actively diversifying manufacturing to other countries, such transitions take time, and sudden changes in trade policy could overwhelm mitigation efforts and force price increases that reduce demand. HP’s global footprint amplifies these risks. Roughly two-thirds of revenue is generated outside the United States, including exposure to emerging markets that tend to be more volatile. Changes in local economic conditions, inflation, interest rates, or government spending can quickly affect demand. Government-related sales are particularly vulnerable to budget delays and shifting spending priorities, which can lead to uneven revenue patterns.

The secular decline in the printing industry is a risk for HP because printing remains one of the company’s most important sources of profit, even as long-term demand for printing continues to shrink. While Personal Systems generates the majority of HP’s revenue, the Printing segment has historically delivered higher margins and stable, recurring cash flows through ink and toner sales. As print volumes decline structurally, this profit engine is gradually weakening, which poses a meaningful risk to HP’s overall earnings power. The core issue is the ongoing shift from physical documents to digital workflows. Businesses and consumers increasingly rely on cloud storage, digital collaboration tools, and electronic signatures, reducing the need to print documents altogether. This trend has been reinforced by remote and hybrid work, where documents are shared, reviewed, and approved digitally rather than printed. These changes are structural, not cyclical, meaning demand is unlikely to rebound even if economic conditions improve. As print volumes fall, HP faces pressure on multiple fronts. Lower hardware usage reduces demand for consumables, directly affecting the recurring revenue streams that have historically supported margins. At the same time, competition intensifies as vendors fight over a shrinking market. This leads to greater price pressure in both printers and supplies, making it harder for HP to offset volume declines through pricing alone. The risk is compounded by the cost structure of the printing business. While volumes decline, many costs do not fall at the same pace, which puts pressure on profitability. Industry analysts have highlighted this imbalance as a structural challenge across the print sector, contributing to negative outlooks for many companies operating in the space. For HP, this matters because even modest declines in printing profitability can have an outsized impact on overall results given the segment’s importance to group earnings. There is also a longer-term strategic risk. If printing profits erode faster than HP can replace them with growth in other areas such as services, subscriptions, or higher-value industrial printing, the company could be left increasingly reliant on the Personal Systems segment, which operates with thinner margins and greater cyclicality. This raises concerns that printing could become a “melting ice cube,” where cash flows steadily decline despite ongoing efforts to manage the business more efficiently.

Reasons to invest

PCs are a reason to invest in HP because the PC market is entering a multi-year upgrade cycle driven by two powerful and overlapping forces: the transition to Windows 11 and the emergence of AI-enabled PCs. Together, these trends are shifting the PC market from a volume-driven recovery to a value-driven one, where HP is well positioned to benefit. A large part of the global PC installed base is simply outdated. Many devices purchased four to five years ago cannot run Windows 11, forcing a hardware refresh rather than a simple software upgrade. While around 60% of the installed base has already transitioned, roughly 40% remains, with the biggest opportunity in small and mid-sized businesses and in regions outside North America, such as Europe and Asia. This creates a visible demand tailwind that management expects to last through fiscal year 2026 and likely beyond. On top of this traditional refresh cycle, AI PCs represent a structural upgrade rather than a routine replacement. These devices include dedicated AI chips that allow artificial intelligence workloads to run directly on the device instead of in the cloud. For businesses, this matters because it improves data security, reduces reliance on cloud computing costs, lowers latency, and enables new use cases that were not practical before. For consumers, AI PCs enable more advanced voice control, writing assistance, image creation, security features, and productivity tools built directly into the operating system. Adoption is already happening faster than expected. AI PCs accounted for more than 30% of HP’s shipments in the end of fiscal year 2025, and management expects this to rise to 40–50% in fiscal year 2026 and exceed 70% by fiscal year 2028. Importantly, HP has doubled AI PC revenue year over year and is gaining market share in both commercial and consumer segments, particularly in premium categories such as workstations and high-end notebooks. This shift matters financially because AI PCs are not low-end commodity devices. They carry higher average selling prices and are typically bundled with services, security features, and peripherals. HP has been deliberately pushing its mix toward these higher-value categories, allowing revenue to grow faster than unit volumes.

Innovation is a reason to invest in HP because it underpins the company’s shift from a purely cyclical hardware vendor toward a portfolio that combines differentiated products, software, and recurring revenue streams. HP’s recent innovation efforts are clearly tied to customer productivity, security, and long-term value creation. A central theme in HP’s innovation strategy is bringing intelligence closer to where data is created and used. The launch of edge-focused AI devices, such as AI stations powered by NVIDIA that can run very large AI models locally, reflects a practical response to customer needs around data privacy, latency, and cost. By enabling advanced AI workloads to run on-site instead of in the cloud, HP addresses concerns around data control and ongoing cloud expenses, particularly for enterprises handling sensitive information. HP is also using innovation to improve everyday productivity in tangible ways. New AI-enabled monitors and peripherals are designed to enhance remote and hybrid work by improving audio, video, and collaboration quality. In printing, HP is embedding AI directly into workflows to make tasks simpler and more efficient, such as automatically cleaning documents before printing, reducing wasted pages, improving scan quality, and organizing files without manual input. These may seem incremental individually, but together they improve user experience and reinforce customer loyalty in mature markets. On the enterprise side, innovation increasingly extends beyond hardware. HP’s Workforce Experience platform is a good example of how the company is building software and services around its installed base. By collecting real-time data from tens of millions of devices, HP can proactively identify and fix IT issues before they disrupt employees. The integration of generative AI through partnerships with Microsoft further enhances this capability, allowing IT teams to respond faster and manage complexity more effectively. This shifts HP from a one-time hardware sale toward an ongoing service relationship. Importantly, management has been explicit that innovation is closely linked to financial outcomes. New products and platforms are designed to support higher-margin, less cyclical revenue streams, including subscriptions, services, and managed solutions. This transition is gradual, but it is intentional. By innovating not only in devices but also in business models, HP aims to smooth earnings volatility and improve the quality of its revenue over time.

Cost reductions are a reason to invest in HP because they highlight management’s ability to consistently improve efficiency while freeing up resources to invest in growth, innovation, and shareholder returns. In an industry where pricing power is limited and margins can be volatile, disciplined cost control is a critical lever for protecting profitability across cycles. HP has a strong track record of executing large-scale cost programs successfully. Its multiyear Future Ready plan materially exceeded expectations, delivering $2,2 billion in annualized savings versus an initial target of $1,4 billion. Importantly, these savings were achieved efficiently, with the benefits significantly outweighing the restructuring costs required to implement them. This demonstrates not only financial discipline, but also execution credibility, which reduces the risk that announced cost programs remain theoretical. Building on this foundation, HP is now launching a new company-wide initiative centered on embedding AI across its operations. This is not positioned as a one-off cost-cutting exercise, but as a structural redesign of how work is done. By rethinking processes first and then applying AI and automation, HP aims to accelerate product development, improve customer service, and meaningfully boost employee productivity. Management has clear visibility on roughly $1 billion in additional annual cost savings over the next three years. These cost reductions matter because they directly support HP’s strategic flexibility. Lower operating costs allow the company to continue investing in key growth areas such as AI PCs, premium devices, services, and software, even in periods of weaker demand. They also help offset external pressures such as rising component costs, pricing competition, and macroeconomic headwinds, reducing the risk that margins erode sharply in down cycles. Finally, HP’s approach to cost reductions supports long-term shareholder returns. By structurally lowering its cost base rather than relying on short-term fixes, HP strengthens cash generation and reinforces its ability to return capital while maintaining balance sheet discipline.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 2,65, which is from the fiscal year 2025. I have selected a projected future EPS growth rate of 5%. Finbox expects EPS to grow by 5%. Additionally, I have selected a projected future P/E ratio of 10, which is double the growth rate. This decision is based on HPs historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be $10,67 We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy HP at a price of $5,33 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 3.697, and capital expenditures were 897. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 628 in our calculations. The tax provision was 139. We have 934,7 outstanding shares. Hence, the calculation will be as follows: (3.697 – 628 + 139) / 934,7 x 10 = $34,32 in Ten Cap price.

The final calculation is referred to as the Payback Time price. It is a calculation based on the free cash flow per share. With HP's free cash flow per share at $3,00 and a growth rate of 5%, if you want to recoup your investment in 8 years, the Payback Time price is $30,08.

Conclusion

I find HP Inc. to be an interesting company with strong management. The company has built a moat through a trusted global brand with a large installed base, meaningful scale advantages in manufacturing and sourcing, deep relationships with enterprise customers and IT channels, differentiated hardware-level security, proprietary printing technology, and growing recurring revenue from supplies and subscriptions. HP has consistently delivered a high ROIC, and while ROIC reached its lowest level in fiscal year 2025, it remains high in absolute terms. Free cash flow also declined to its lowest level in fiscal year 2025 and is expected to remain roughly flat in fiscal year 2026, yet the business continues to generate solid profits and returns most of this cash to shareholders through dividends and buybacks. Competition is a risk for HP because it operates in mature, fast-moving markets where pricing pressure is intense and differentiation is difficult to sustain, with strong global rivals in PCs and printing, cheaper third-party supplies, currency-driven cost advantages for competitors, and short product cycles that can quickly compress margins or erode market share. Macroeconomic factors are another risk, as demand for PCs and printers is highly sensitive to economic slowdowns, while inflation, tariffs, and rising component costs can pressure margins in price-sensitive markets, and with most revenue generated outside the United States, global economic volatility and shifts in government and corporate spending can quickly impact volumes and profitability. The secular decline in the printing industry is also a risk because printing remains a key source of high-margin, recurring profits even as long-term demand continues to shrink due to digital workflows and remote work, with falling volumes, rising competition, and a cost base that does not decline at the same pace threatening to weaken HP’s most important profit engine and increase reliance on the lower-margin, more cyclical PC business. At the same time, PCs are a reason to invest in HP as the market enters a multi-year upgrade cycle driven by the Windows 11 transition and the rapid adoption of AI-enabled PCs, both of which favor higher-value devices, and with a large aging installed base still to be refreshed, HP is well positioned to grow revenue and improve mix rather than compete solely on volume. Innovation further supports the investment case by helping HP move beyond cyclical hardware sales toward differentiated products, software, and recurring services that improve productivity, security, and customer stickiness, gradually improving revenue quality and reducing cyclicality. Cost reductions also strengthen the case, as management has a proven track record of executing efficiency programs that structurally lower the cost base, protect profitability across cycles, and support investment in growth while strengthening long-term cash generation. Despite these positives, I believe there are more attractive opportunities elsewhere in the market and therefore do not plan to invest in HP at this time.

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