Is Hewlett-Packard a Turnaround Story?

With shares of Hewlett-Packard (NYSE:HPQ) trading at around $19.77, is the company an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Here we are again. The last time Hewlett-Packard was written about here, it was several months ago, and it was given an OUTPERFORM rating. Many folks shook their heads, which was understandable. That call was based on reaction to short-term news and numbers combined with the company’s quality management, strong cash flow, and well thought-out restructuring plans. Now, let’s take a look at the current situation.

If you’re worried about the stock being overpriced due to the recent run-up, keep in mind that Hewlett-Packard is trading at five times forward earnings. Margins aren’t very impressive, and gross margin fell 10 basis points last quarter. There were also revenue declines in its Enterprise Services (7 percent), Personal Systems (8 percent), Printing (5 percent), and Enterprise Group (7 percent). There was a slight increase in revenue in H-P Financial Services (1 percent). Overall, the company saw a 5.5 percent drop in revenue year-over-year.