HP Inc. (NYSE:HPQ)

Analysis of the valuation multiples between October 2013 and October 2018 reveals a period of significant volatility in market pricing relative to fundamental performance metrics. A cyclical pattern is evident, characterized by two distinct valuation peaks and a notable contraction in 2015 across all measured ratios.

Price to Earnings (P/E) Ratio

The P/E ratio exhibited substantial fluctuation, reaching a peak of 14.57 in 2014 before plummeting to 4.82 in 2015. A subsequent recovery occurred, with the ratio climbing to 13.51 by 2017, followed by a sharp decline to 6.50 in 2018.

Price to Operating Profit (P/OP) Ratio

The P/OP trajectory closely mirrored the P/E ratio, peaking in 2014 at 10.16 and contracting significantly to 4.02 in 2015. A recovery phase led to a high of 9.70 in 2017, with the ratio ending the period at 8.52 in 2018.

Price to Sales (P/S) Ratio

The P/S ratio demonstrated consistent volatility, recording a minimum value of 0.21 in 2015. Valuation peaks were observed in both 2014 and 2017 at 0.66, before moderating to 0.59 in 2018.

Price to Book Value (P/BV) Ratio

Available data indicates an initial increase from 1.96 in 2013 to 2.73 in 2014. However, a sharp decline occurred in 2015, with the ratio dropping to 0.79, signaling that the market price fell below the book value of the equity during that period.

Overall, the synchronization of the troughs in 2015 across the P/E, P/OP, P/S, and P/BV ratios suggests a period of severe market undervaluation or a significant decline in investor confidence during that fiscal year. The subsequent recovery through 2017 and the downturn in 2018 indicate ongoing instability in the stock's valuation multiples.

The financial data from October 31, 2013, to October 31, 2018, reveals significant volatility in share price and valuation multiples, characterized by a sharp contraction in 2015 followed by a period of recovery and diverging earnings performance.

Share Price Trends

The share price exhibited substantial fluctuations over the six-year period. After an initial increase to a peak of 39.82 US$ in 2014, a precipitous decline occurred in 2015, with the price falling to 12.26 US$. Subsequently, a steady upward trend was observed from 2016 through 2018, with the price recovering to 22.29 US$ by the end of the period.

Earnings per Share (EPS) Performance

Earnings remained relatively stable between 2013 and 2015, ranging from 2.54 US$ to 2.73 US$. A notable decline in profitability occurred in 2016, where EPS dropped to 1.46 US$, remaining low in 2017 at 1.54 US$. However, a significant recovery is evident in 2018, with EPS rising to a period high of 3.43 US$, indicating a strong improvement in bottom-line performance.

Price-to-Earnings (P/E) Ratio Analysis

The P/E ratio demonstrates a non-linear relationship with the share price. The ratio peaked at 14.57 in 2014, reflecting higher market optimism. In 2015, the ratio collapsed to 4.82, driven by the sharp drop in share price despite stable earnings. While the multiple recovered to 13.51 by 2017, it fell sharply to 6.50 in 2018. This final decrease in the P/E ratio occurred despite an increase in share price, as the growth in EPS (3.43 US$) significantly outpaced the growth in the stock price, resulting in a lower valuation multiple relative to earnings.

Between 2013 and 2018, the valuation of the common stock relative to operating profit exhibited significant volatility, characterized by a sharp contraction in 2015 followed by a period of gradual recovery and stabilization.

Share Price Dynamics

The share price experienced a peak of 39.82 US$ in October 2014, followed by a precipitous decline to a low of 12.26 US$ in 2015. From 2016 through 2018, a consistent upward trajectory is observed, with the price recovering to 22.29 US$.

Operating Profit per Share Trends

Operating profit per share peaked at 3.92 US$ in 2014 before entering a decline that reached a trough of 2.08 US$ in 2016. A recovery phase followed, with profit per share increasing to 2.62 US$ by October 2018, although this remained below the 2013-2014 levels.

Price to Operating Profit (P/OP) Multiple Analysis

The P/OP ratio reached a high of 10.16 in 2014, indicating a higher market premium relative to operating earnings. A significant compression occurred in 2015, with the ratio falling to 4.02, primarily driven by the sharp decrease in share price. Between 2016 and 2018, the multiple expanded again, peaking at 9.70 in 2017 before moderating to 8.52 in 2018, suggesting a realignment of market valuation with operating performance.

The valuation of the common stock relative to revenue exhibits significant volatility between 2013 and 2018, characterized by a sharp contraction in 2015 followed by a period of stabilization. The Price to Sales (P/S) ratio fluctuates between a minimum of 0.21 and a maximum of 0.66, reflecting substantial shifts in market valuation and underlying financial metrics.

Price to Sales (P/S) Ratio Trends

The P/S ratio increased from 0.48 in 2013 to a peak of 0.66 in 2014. A precipitous decline followed, reaching a trough of 0.21 in 2015, which marks the lowest valuation multiple within the period. A recovery occurred in 2016, with the ratio returning to 0.55 and peaking again at 0.66 in 2017, before settling at 0.59 in 2018.

Share Price and Sales Per Share Dynamics

Share prices reached a high of US$ 39.82 in 2014 before falling sharply to US$ 12.26 in 2015. A gradual recovery in equity value is observed from 2016 through 2018, with the price ascending to US$ 22.29. Concurrently, sales per share remained relatively stable between 2013 and 2015, but experienced a significant reduction in 2016, falling from US$ 57.68 to US$ 28.28. This metric then showed a steady upward trend, reaching US$ 37.64 by 2018.

Valuation Analysis

The contraction of the P/S ratio to 0.21 in 2015 was driven primarily by the collapse in share price rather than a decline in sales per share. Conversely, the recovery of the P/S ratio between 2016 and 2018 occurred despite a structural drop in sales per share, indicating that the market attributed a higher multiple to each dollar of revenue during the later period. The stabilization of the ratio between 0.55 and 0.66 from 2016 to 2018 suggests a normalization of the company's valuation relative to its top-line performance.

The financial data indicates a significant transformation in the equity structure and market valuation of the entity between 2013 and 2018, characterized by a transition from positive to negative book value.

Share Price Performance

A volatile trajectory is observed, with the share price peaking at 39.82 US$ in 2014 before experiencing a sharp contraction to 12.26 US$ in 2015. Following this decline, a consistent recovery trend is evident, with the price steadily increasing to reach 22.29 US$ by October 31, 2018.

Book Value per Share (BVPS) Trends

BVPS exhibited modest growth during the initial three-year period, rising from 14.29 US$ in 2013 to 15.50 US$ in 2015. However, a severe inversion occurred in 2016, with the value dropping to -2.28 US$. Although the negative position improved slightly over the subsequent two years, ending at -0.41 US$ in 2018, the BVPS remained negative for the latter half of the analyzed period.

Price to Book Value (P/BV) Interpretation

The P/BV ratio rose from 1.96 in 2013 to a peak of 2.73 in 2014, indicating an increasing market premium over the accounting value. This trend reversed sharply in 2015, with the ratio falling to 0.79, suggesting the market valued the company at a discount to its book value. For the period between 2016 and 2018, the P/BV ratio is absent, as the transition to a negative book value renders this specific multiple mathematically inapplicable for traditional valuation analysis.