Price to FCFE (P/FCFE)
Free Cash Flow to Equity (FCFE)
HP Inc., FCFE calculation
US$ in millions
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).
An analysis of financial performance between October 2013 and October 2018 reveals significant volatility in both operational cash generation and free cash flow to equity (FCFE). Net cash provided by operating activities peaked in 2014 at 12,333 million before experiencing a severe contraction, reaching a low of 3,230 million in 2016. While a moderate recovery trend is observed in 2017 and 2018, operating cash flows remained substantially below the levels recorded during the 2013-2014 period.
- Free Cash Flow to Equity Volatility
- FCFE exhibited extreme fluctuations over the five-year period. After a steady increase from 3,466 million in 2013 to a peak of 8,276 million in 2015, FCFE plummeted to 716 million in 2016. This represents a sharp reversal in cash available to equity holders, followed by a recovery to 4,351 million in 2017 and a subsequent decline to 1,915 million in 2018.
- Divergence Between Operating Cash and FCFE
- A notable divergence is observed in 2015 and 2017, where FCFE exceeded net cash provided by operating activities. In 2015, FCFE reached 8,276 million despite operating cash falling to 6,490 million. Similarly, in 2017, FCFE was 4,351 million against operating cash of 3,677 million. Such patterns typically indicate significant non-operational cash inflows, such as asset divestitures or new debt issuance, or a substantial reduction in capital expenditures.
- Operational Cash Conversion Trends
- The relationship between operating cash and FCFE remained inconsistent. The most significant contraction in cash conversion occurred in 2016, when FCFE represented only a small fraction of the operating cash provided. In contrast, the periods of 2015 and 2017 showed an inverse relationship where equity cash flow was augmented beyond the limits of operational performance.
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Price to FCFE Ratio, Current
HP Inc., current P/FCFE calculation, comparison to benchmarks
| No. shares of common stock outstanding | 1,481,913,639 |
| Selected Financial Data (US$) | |
| Free cash flow to equity (FCFE) (in millions) | 1,915) |
| FCFE per share | 1.29 |
| Current share price (P) | 18.09 |
| Valuation Ratio | |
| P/FCFE | 14.00 |
| Benchmarks | |
| P/FCFE, Competitors1 | |
| Apple Inc. | 55.71 |
| Arista Networks Inc. | 50.08 |
| Cisco Systems Inc. | 29.06 |
| Dell Technologies Inc. | 17.94 |
| Lumentum Holdings Inc. | 460.95 |
| Super Micro Computer Inc. | — |
Based on: 10-K (reporting date: 2018-10-31).
1 Click competitor name to see calculations.
If the company P/FCFE is lower then the P/FCFE of benchmark then company is relatively undervalued.
Otherwise, if the company P/FCFE is higher then the P/FCFE of benchmark then company is relatively overvalued.
Price to FCFE Ratio, Historical
HP Inc., historical P/FCFE calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 1,553,494,507 | 1,645,228,387 | 1,705,451,042 | 1,791,848,366 | 1,834,081,993 | 1,908,777,048 | |
| Selected Financial Data (US$) | |||||||
| Free cash flow to equity (FCFE) (in millions)2 | 1,915) | 4,351) | 716) | 8,276) | 6,309) | 3,466) | |
| FCFE per share3 | 1.23 | 2.64 | 0.42 | 4.62 | 3.44 | 1.82 | |
| Share price1, 4 | 22.29 | 20.74 | 15.51 | 12.26 | 39.82 | 28.07 | |
| Valuation Ratio | |||||||
| P/FCFE5 | 18.08 | 7.84 | 36.94 | 2.65 | 11.58 | 15.46 | |
| Benchmarks | |||||||
| P/FCFE, Competitors6 | |||||||
| Apple Inc. | — | — | — | — | — | — | |
| Arista Networks Inc. | — | — | — | — | — | — | |
| Cisco Systems Inc. | — | — | — | — | — | — | |
| Dell Technologies Inc. | — | — | — | — | — | — | |
| Lumentum Holdings Inc. | — | — | — | — | — | — | |
| Super Micro Computer Inc. | — | — | — | — | — | — | |
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).
1 Data adjusted for splits and stock dividends.
3 2018 Calculation
FCFE per share = FCFE ÷ No. shares of common stock outstanding
= 1,915,000,000 ÷ 1,553,494,507 = 1.23
4 Closing price as at the filing date of HP Inc. Annual Report.
5 2018 Calculation
P/FCFE = Share price ÷ FCFE per share
= 22.29 ÷ 1.23 = 18.08
6 Click competitor name to see calculations.
The Price to Free Cash Flow to Equity (P/FCFE) ratio exhibited significant volatility between 2013 and 2018, reflecting inconsistent correlations between equity valuation and cash flow generation.
- Share Price Performance
- A peak share price of 39.82 US$ was recorded in 2014, followed by a sharp decline to 12.26 US$ in 2015. Following this trough, a gradual recovery trend is observed, with the price rising steadily to 22.29 US$ by 2018.
- Free Cash Flow to Equity (FCFE) Trends
- FCFE per share showed an initial upward trajectory, peaking at 4.62 US$ in 2015. This growth was followed by a severe contraction to 0.42 US$ in 2016. While a recovery to 2.64 US$ occurred in 2017, the value declined again to 1.23 US$ in 2018, indicating instability in cash flow generation.
- P/FCFE Ratio Dynamics
- The P/FCFE ratio experienced extreme fluctuations, reaching a minimum of 2.65 in 2015 and a maximum of 36.94 in 2016. The 2015 low was the result of a compressed share price coinciding with peak FCFE. The subsequent spike in 2016 was primarily driven by the precipitous drop in FCFE per share rather than an increase in market valuation.
By 2018, the P/FCFE ratio reached 18.08, which is relatively aligned with the 2013 starting value of 15.46. This suggests a normalization of the valuation multiple following a period of extreme variance in both market price and underlying cash flow metrics.
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