Hewlett-Packard Co's Hold Recommendation Affirmed

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Hewlett-Packard (NYSE: HPQ) has been reiterated by TheStreet Ratings as a hold with a ratings score of C+. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and attractive valuation levels. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 50.48% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • HEWLETT-PACKARD CO has improved earnings per share by 17.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HEWLETT-PACKARD CO turned its bottom line around by earning $2.62 versus -$6.45 in the prior year. This year, the market expects an improvement in earnings ($3.71 versus $2.62).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Computers & Peripherals industry and the overall market on the basis of return on equity, HEWLETT-PACKARD CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • HPQ's debt-to-equity ratio of 0.89 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.75 is weak.
  • The gross profit margin for HEWLETT-PACKARD CO is currently lower than what is desirable, coming in at 25.76%. 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 5.06% is significantly lower than the industry average.

Hewlett-Packard Company, together with its subsidiaries, provides 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 $56.9 billion and is part of the technology sector and computer hardware industry. Shares are up 6.3% year to date as of the close of trading on Thursday.

You can view the full Hewlett-Packard Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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