Why Hewlett-Packard (HPQ) Stock Is Up Today

NEW YORK (TheStreet) -- Shares of Hewlett-Packard  (HPQ) were up 0.54% to $36.99 in afternoon trading Wednesday after CEO Meg Whitman said the IT company is back in position to consider takeover options three years after the Autonomy disaster.

The company's near-record amounts of cash allow it to pursue an acquisition, and "the worst sales forecast among computer peers provides the motivation for HP to buy its way to more competitive products," according to Bloomberg.

Whitman's remarks come three years after HP bought data-analysis company Autonomy, which ultimately led to an $8.8 billion writedown and numerous shareholder lawsuits.

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Bloomberg speculates Teradata could be a potential acquisition target. Raymond James Financial  (RJF)  suggests SimpliVity, while Sterne Agee thinks data protection company Imperva (IMPV) could be in play.

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

"We rate HEWLETT-PACKARD CO (HPQ) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, attractive valuation levels, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, HPQ's share price has jumped by 69.10%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HPQ should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.3%. Since the same quarter one year prior, revenues slightly increased by 1.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $3,647.00 million or 36.38% when compared to the same quarter last year. In addition, HEWLETT-PACKARD CO has also modestly surpassed the industry average cash flow growth rate of 35.74%.
  • 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.
  • You can view the full analysis from the report here: HPQ Ratings Report

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