HP Inc. (NYSE:HPQ)

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HP Inc., Profitability Ratios: Reported vs. Adjusted

Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).

HP Inc., adjusted profitability ratios

	Oct 31, 2018	Oct 31, 2017	Oct 31, 2016	Oct 31, 2015	Oct 31, 2014	Oct 31, 2013
Net Profit Margin
Reported net profit margin	9.11%	4.85%	5.17%	4.41%	4.50%	4.55%
Adjusted net profit margin	9.10%	4.86%	5.17%	4.39%	4.50%	4.54%
Return on Equity (ROE)
Reported ROE	—	—	—	16.40%	18.75%	18.75%
Adjusted ROE	—	—	—	16.35%	18.77%	18.71%
Return on Assets (ROA)
Reported ROA	15.39%	7.67%	8.60%	4.26%	4.86%	4.84%
Adjusted ROA	15.37%	7.68%	8.60%	4.25%	4.86%	4.83%

Profitability and efficiency metrics exhibited relative stability from 2013 to 2015, followed by a period of significant growth that culminated in a peak across most indicators in 2018. The variance between reported and adjusted figures remains marginal throughout the analyzed period, suggesting that mark-to-market adjustments for available-for-sale securities did not materially alter the overall financial performance profile.

Net Profit Margin: The reported net profit margin remained consistent, fluctuating between 4.41% and 5.17% from 2013 to 2017. A substantial increase was observed in 2018, where the margin reached 9.11%. The adjusted net profit margin mirrored this trajectory with high precision, indicating that non-operating adjustments had a negligible impact on the bottom-line margin.
Return on Equity (ROE): ROE remained stable at approximately 18.75% during 2013 and 2014 before experiencing a decline to 16.40% in 2015. The adjusted ROE followed a nearly identical pattern, ending at 16.35% in 2015, confirming a moderate reduction in equity efficiency during that fiscal year.
Return on Assets (ROA): ROA displayed a trend consistent with the net profit margin, experiencing a slight dip to 4.26% in 2015. A sharp recovery followed in 2016, with the ratio rising to 8.60%, and eventually peaking at 15.39% in 2018. The alignment between reported and adjusted ROA suggests that the increase in asset productivity was driven by core operational performance rather than valuation adjustments of securities.

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Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).

	Oct 31, 2018	Oct 31, 2017	Oct 31, 2016	Oct 31, 2015	Oct 31, 2014	Oct 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Net earnings	5,327)	2,526)	2,496)	4,554)	5,013)	5,113)
Net revenue	58,472)	52,056)	48,238)	103,355)	111,454)	112,298)
Profitability Ratio
Net profit margin¹	9.11%	4.85%	5.17%	4.41%	4.50%	4.55%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net earnings	5,320)	2,529)	2,494)	4,539)	5,018)	5,102)
Net revenue	58,472)	52,056)	48,238)	103,355)	111,454)	112,298)
Profitability Ratio
Adjusted net profit margin²	9.10%	4.86%	5.17%	4.39%	4.50%	4.54%

2018 Calculations

¹ Net profit margin = 100 × Net earnings ÷ Net revenue
= 100 × 5,327 ÷ 58,472 = 9.11%

² Adjusted net profit margin = 100 × Adjusted net earnings ÷ Net revenue
= 100 × 5,320 ÷ 58,472 = 9.10%

The financial performance from 2013 to 2018 is characterized by a period of earnings contraction followed by a significant recovery in both absolute profit and operational efficiency. Net earnings experienced a steady decline over the first four years of the period, reaching a trough in 2016 before rebounding to a period peak in 2018.

Net Earnings Trajectory: Reported and adjusted net earnings remained relatively stable between 2013 and 2014, exceeding US$ 5 billion. A downward trend emerged in 2015, leading to a sharp decrease in 2016, where earnings fell to approximately US$ 2.5 billion. This level remained stagnant through 2017 before a substantial increase occurred in 2018, with adjusted net earnings rising to US$ 5.32 billion.
Adjusted Net Profit Margin Analysis: The adjusted net profit margin showed relative stability between 2013 and 2015, fluctuating within a narrow range of 4.39% to 4.54%. An uptick to 5.17% was observed in 2016, followed by a slight correction to 4.86% in 2017. A significant expansion in profitability occurred in 2018, with the adjusted net profit margin nearly doubling to 9.10%, indicating a marked improvement in cost management or revenue quality.
Reported versus Adjusted Variance: A minimal divergence is observed between reported and adjusted figures throughout the entire period. The proximity of the reported net profit margin to the adjusted net profit margin suggests that non-recurring items, extraordinary gains, or losses had a negligible impact on the overall bottom-line results.

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Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).

	Oct 31, 2018	Oct 31, 2017	Oct 31, 2016	Oct 31, 2015	Oct 31, 2014	Oct 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Net earnings	5,327)	2,526)	2,496)	4,554)	5,013)	5,113)
Total HP stockholders’ equity (deficit)	(639)	(3,408)	(3,889)	27,768)	26,731)	27,269)
Profitability Ratio
ROE¹	—	—	—	16.40%	18.75%	18.75%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net earnings	5,320)	2,529)	2,494)	4,539)	5,018)	5,102)
Total HP stockholders’ equity (deficit)	(639)	(3,408)	(3,889)	27,768)	26,731)	27,269)
Profitability Ratio
Adjusted ROE²	—	—	—	16.35%	18.77%	18.71%

2018 Calculations

¹ ROE = 100 × Net earnings ÷ Total HP stockholders’ equity (deficit)
= 100 × 5,327 ÷ -639 = —

² Adjusted ROE = 100 × Adjusted net earnings ÷ Total HP stockholders’ equity (deficit)
= 100 × 5,320 ÷ -639 = —

Financial performance over the analyzed six-year period is characterized by significant volatility in net earnings and a decline in return on equity during the initial three years of the sequence.

Net Earnings Trends: A downward trajectory in both reported and adjusted net earnings is observed from 2013 to 2016. A substantial contraction occurred in 2016 and 2017, during which earnings fell to approximately 2.5 billion US dollars. This was followed by a sharp recovery in 2018, with net earnings rising to 5.3 billion US dollars, the highest level recorded in the period.
Comparison of Reported and Adjusted Earnings: The variance between reported and adjusted net earnings is minimal across all reporting years. This close alignment suggests that non-recurring items, gains, or losses had a negligible impact on the company's bottom-line profitability.
Adjusted Return on Equity (ROE) Analysis: For the period between 2013 and 2014, the adjusted ROE remained stable at approximately 18.7%. A decline to 16.35% is noted in 2015, which correlates with the reduction in net earnings observed during the same year. Data for ROE is absent for the 2016 through 2018 period.

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Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).

	Oct 31, 2018	Oct 31, 2017	Oct 31, 2016	Oct 31, 2015	Oct 31, 2014	Oct 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Net earnings	5,327)	2,526)	2,496)	4,554)	5,013)	5,113)
Total assets	34,622)	32,913)	29,010)	106,882)	103,206)	105,676)
Profitability Ratio
ROA¹	15.39%	7.67%	8.60%	4.26%	4.86%	4.84%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net earnings	5,320)	2,529)	2,494)	4,539)	5,018)	5,102)
Total assets	34,622)	32,913)	29,010)	106,882)	103,206)	105,676)
Profitability Ratio
Adjusted ROA²	15.37%	7.68%	8.60%	4.25%	4.86%	4.83%

2018 Calculations

¹ ROA = 100 × Net earnings ÷ Total assets
= 100 × 5,327 ÷ 34,622 = 15.39%

² Adjusted ROA = 100 × Adjusted net earnings ÷ Total assets
= 100 × 5,320 ÷ 34,622 = 15.37%

The financial performance between 2013 and 2018 is characterized by a significant divergence between net earnings trajectories and asset utilization efficiency.

Net Earnings Trends: A gradual decline in earnings was observed from 2013 to 2015, followed by a sharp contraction in 2016, where adjusted net earnings fell to 2,494 million US$. After a period of relative stagnation in 2017, a strong recovery occurred in 2018, with earnings reaching a period high of 5,320 million US$.
Adjusted Return on Assets (ROA): The adjusted ROA remained relatively stable between 4.25% and 4.86% from 2013 to 2015. A notable shift occurred in 2016, where the ratio increased to 8.60% despite the concurrent decline in net earnings, indicating a substantial reduction in the total asset base. This upward trend in asset efficiency culminated in 2018, with the adjusted ROA peaking at 15.37%.
Reported versus Adjusted Variance: Minimal variance is observed between reported and adjusted figures across all analyzed years. The proximity of these values suggests that non-recurring items and accounting adjustments had a negligible impact on the overall profitability and asset efficiency profile during this period.

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