HP Inc. (NYSE:HPQ)

The Price to Operating Profit (P/OP) ratio exhibited a significant long-term contraction between 2005 and 2018, reflecting a fundamental shift in market valuation relative to operating performance.

Initial Valuation Compression (2005–2008)

A pronounced downward trend in the P/OP ratio is observed during the initial four-year period, falling from a peak of 23.51 in 2005 to 8.16 in 2008. This compression occurred despite a steady increase in operating profit per share, which rose from 1.22 to 4.33 over the same interval, suggesting that share price growth failed to keep pace with operating profit improvements.

Volatility and Operational Disruption (2009–2012)

The ratio demonstrated instability between 2009 and 2012. Following a brief recovery to 11.79 in 2009, the P/OP ratio declined to 5.41 by 2011. A critical disruption occurred in 2012, where the operating profit per share became negative (-5.68), rendering the P/OP ratio unavailable. This operational downturn coincided with a sharp decline in share price to 14.04.

Stabilization and Lower Baseline (2013–2018)

From 2013 onward, the P/OP ratio stabilized within a lower range, fluctuating between 4.02 and 10.16. While share prices saw a temporary recovery, peaking at 39.82 in 2014, the valuation multiple remained substantially lower than the levels observed in the mid-2000s. The period concluded in 2018 with a P/OP of 8.52, indicating a market valuation that has normalized at a significantly lower multiple compared to the 2005 baseline.