Why Hewlett-Packard (HPQ) Hit a One-Year High Today (Update)

Update (4:15 p.m.): Updated with one-year high price and Tuesday market close information.

NEW YORK (TheStreet) -- Hewlett-Packard  (HPQ) hit a one-year high of $33.45 at the close of trading on Tuesday after the company agreed to pay $57 million to settle a lawsuit that accused HP of defrauding shareholders when it allegedly abandoned a business plan it had promoted.

Former CEO Leo Apotheker said on Aug. 18, 2011 that the company would refocus on business services and products and would also scrap WebOS, which HP had acquired the rights to when the company bought Palm in 2010. Apotheker also announced the company would pay $11.1 billion for British software company Autonomy and said HP could possible spin off its personal computer business. Finally, the company stopped sales of the TouchPad after just seven weeks on the market.

The plaintiffs filed the lawsuit shortly thereafter.

Furthermore, HP CEO Meg Whitman announced at the shareholders' meeting on March 20 that the company would enter the 3-D printing business by the end of the fiscal year. Independent research company Canalys said this market could grow 500% in the next five years and could hit $16.2 billion by 2018, according to CNBC.

Nearly 14 million shares changed hands, slightly more than the average volume of 13,144,100.

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TheStreet Ratings team rates HEWLETT-PACKARD CO as a "hold" with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate HEWLETT-PACKARD CO (HPQ) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. 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 analysis by TheStreet Ratings Team goes as follows:

  • 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 35.41% 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.
  • You can view the full analysis from the report here: HPQ Ratings Report

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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.

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