Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
NEW YORK (
) has been reiterated by TheStreet Ratings as a sell with a ratings score of D+. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.
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Highlights from the ratings report include:
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Computers & Peripherals industry average. The net income has decreased by 16.1% when compared to the same quarter one year ago, dropping from $1,468.00 million to $1,232.00 million.
- The debt-to-equity ratio of 1.23 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, HPQ has a quick ratio of 0.69, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Computers & Peripherals industry and the overall market, HEWLETT-PACKARD CO's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for HEWLETT-PACKARD CO is currently lower than what is desirable, coming in at 25.20%. Regardless of HPQ's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, HPQ's net profit margin of 4.34% is significantly lower than the industry average.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, HPQ has underperformed the S&P 500 Index, declining 18.94% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
Hewlett-Packard Company and its subsidiaries provide products, technologies, software, solutions, and services to individual consumers, small-and medium-sized businesses (SMBs), and large enterprises, including customers in the government, health, and education sectors worldwide. Hewlett-Packard has a market cap of $38.2 billion and is part of the technology sector and computer hardware industry. Shares are up 39.2% year to date as of the close of trading on Wednesday.
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--Written by a member of TheStreet Ratings Staff.
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